DAILY TRADING ADVISORY 30-June-2009

Bernie Madoff gets sentenced to 150 years in jail. VIX drops to lowest levels since Lehman collapse

ECONOMIC DATA

9:00 AM Consumer Confidence

9:00 A&P CaseShiller Home Price Index

9:45 AM Chicago PMI

FRIDAY’S MARKET

Markets started the holiday shortened week on the green. The E-mini SP started the session at 917.00 and pulled back a point in a half. After trying to push higher, above the opening price, the index moved lower to 914.00, the index bounced back to 916.00 and traded in a narrow range for the first minutes of the session. The SP made a new low at 911.75 and bounced to 913.00. While the Russell posted a new low, the SP held and rallied all the way up to 918.50, and after a few minutes and once the Nasdaq started to cooperate it pushed to a new high at 923.25. The rally ended and the markets traded in a narrow range near the daily highs, later, the upside pressure pushed the SP up to 924.00. The narrow range trading pattern continued and despite the pullback on the Nasdaq and Russell the SP refused to break down. Markets traded in a narrow range into the end of the session, the SP added 7.25 points and settled at 921.25, the Nasdaq ended higher by 4.75 points closing the session at 1481.50 and the Russell gained 1.70 points at 508.00

MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “Last week sell off attempt may have not ended yet, the SP is facing two strong resistance areas, the first one around the 918.00 area and the second one on the 924.00-926.00 band; for this market to give a try at the 950.00 area or higher, the index has to close above those areas, until then, there area great chances that last Monday’s lows or a bit lower will get tested. This week is full of economic data, is also a shortened holiday week as markets will be closed next Friday for an extended weekend honoring the Independence Day, so the main economic numbers, the unemployment figures will get released next Thursday. Also we have the end of the second quarter, I suspect that fund managers will try to keep the markets at reasonable levels and the markets will rebound if there are some daily or intraday sell offs. Additional to this, as the unemployment figures are a lagging indicator, I think that bad economic data will get accepted by the market players and the markets will hold, at least for the week. Saying this, early weakness or a weak close on Monday, may turn to be a buying opportunity for the rest of the week, and maybe, the SP will show more consolidation between the 900.00 and 925.00 levels, but take into account that initial weakness will be present below the 908.50 to 905.75, and it could see additional selling coming into the markets if that index trades below 898.00-896.00.”

Markets made their daily lows during the night and the earlier pullback gave way to a solid move that reached my 924.00 area. That is the June 19 high from where the SP, after a narrow range session, saw a sharp sell off that pushed that index below the 890.00 area.

If yesterday I mentioned on my newsletter that the SP MUST close above the 924.00 area for that market to give another try to the highs, yesterday’s action just confirms the importance of that level. Take into account that once the end of quarter is gone, a profit taking move that pushed the SP below the 890.00 area may be seen, to negate this scenario, the 924.00-926.00 area may get solidly exceeded and hold for two consecutive closes, or the rally from last week lows may be only a countertrend move in a market that may see lower prices.

Another important factor is the VIX, which fell to its lowest levels in the year; it seems that traders are very confident with the market condition, the March to July rally and the economic data. This is a red flag, too much complacency, but that does not mean that the markets can not move higher.

The slow activity seen during yesterday’s session may continue for the rest of the week, and while today we will get the first economic piece of data, no matter if the numbers are goods or bad, the daily sideways pattern may hold for the rest of the week.

So, let’s try to make our life easier, and let’s give a chance to the NQ to show the way, but with high precaution as mixed market conditions where rotation is seen between the different indexes, may give way to erratic moves that do not result in a trend.

For today’s trading session, once the economic numbers get released, go long once the NQ trades in positive territory, but beware of any bullishness if both, the SP and Nasdaq area trading in negative territory as markets could surprise those who overweight the lower VIX thinking that the way is only to the upside.

TODAY’S SESSION

There is resistance at 922.50-924.25 on the SP, 1484.00-1486.00 on the Nasdaq and 509.10-510.20on the Russell, as I wrote yesterday, those levels on the SP are critical for that market to push up, the Nasdaq may stop lagging in order to help the SP to push higher to 926.00-927.75 while the NQ reaches 1489.00-1490.00 and the Russell 513.20-514.50. If the rally does not end there, then the indexes may go for the next areas at 930.50-931.00 on the SP, 1494.00-1496.00 on the Nasdaq and 518.00-518.60on the Russell.

Initial support at 919.75-918.00 on the SP, 1476.50-1474.00 on the Nasdaq and 506.10-505.30 on the Russell. Some selling may be seen below those areas pushing the markets down to 916.00-914.00 on the SP, 1468.00-1466.00 on the Nasdaq and 501.50-500.80 on the Russell. If those fail to hold and the sideways pattern is due to continue, then the next levels at 912.00-911.00 on the SP,1461.00-1460.50 on the Nasdaq and 494.90-493.70 on the Russell must hold. GOOD LUCK

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

934.25-936.00

1501.75-1503.50

522.30-523.40

Resistance 3

930.50-931.00

1494.00-1496.00

518.00-518.60

Resistance 2

926.00-927.75

1489.00-1490.00

513.20-514.50

Resistance 1

922.50-924.25

1484.00-1486.00

509.10-510.20

PIVOT

917.50

1480.25

506.70

Support 1

919.75-918.00

1476.50-1474.00

506.10-505.30

Support 2

916.00-914.00

1468.00-1466.00

501.50-500.80

Support 3

912.00-911.00

1461.00-1460.50

494.90-493.70

Support 4

907.50-906.00

1454.00-1452.00

491.10-490.20