DAILY TRADING ADVISORY 10-September-2008
U.S. equity indexes fall strong on more financial weakness erasing the previous day gains, S&P down by 3.4%. Pending Home sales fell by 3.2%.
ECONOMIC DATA
10:35 AM Crude Inventories
YESTERDAY’S MARKETS
Markets tumbled on concerns over Lehman’s. After making its daily lows during the Globex session at 1275.00 on the SP, the different indexes moved lower. The E-mini SP opened the session at 1267.00 and pushed lower to 1257.50 from where it bounced back reaching 1269.75, just below our resistance levels. Unable to break higher and with double tops on the other indexes, the SP sold off steadily breaking every support level and reaching 1245.50 closing the open gap from the previous session. After trading sideways for the next two hours and failing to break above 1255.00, a second round of selling pushed the indexes sharply lower. The SP reached 1235.00 bounced back up to 1240.00 and fell to new lows at 1233.00. Another mild short covering rally drove prices up to 1238.50 where another wave of selling pushed the index to its daily lows at 1223.50 at the end of the session and bounced back a bit managing to close a couple of points above fair value. For the day, the E-mini SP ended lower by 40.50 points at 1226.50, the Nasdaq lost 32.00 points ending the session at 1728.75 and the Russell gave back 25.00 points and settled at 709.30. The Dow sold off strongly losing 280 points ending the session at 11230.
MARKET COMMENTARY AND OUTLOOK
Last Friday I wrote:” Yesterday’s wild session has placed the SP on a neutral position that could result in a multi day consolidation between the 1282.00 Globex high and the 1245.00 area. This could last until next Thursday that the September contract will be rolling into December and then maybe on Friday as the retail figures get released move the index back down. However, yesterday weakness on the Nasdaq, its divergence compare to the other indexes, that has been happening during the last few months, has resulted in lower prices for the other indexes, but yesterday “outside day” on that index, that maybe placed a double bottom, also indicates that we could see a consolidation session. This strong rally, that started last Friday, probably is a 1-4 days countertrend move in a falling market that in my opinion should reach the 1180.00 area on the SP during the coming weeks. However, multiple closes above my 1262.00-1264.00 area will negate that pattern and result in a move that drives the SP to the 1320.00-1340.00 levels before another sharp drop. Yesterday’s reaction to the upside, once the E-mini SP traded above the 1256.25 area, and then later above 1261.50 that resulted in a fast late rally give us the clues for today’s strategy, all the time that the SP keeps trading above 1261.00 will indicate higher prices, and a pullback to the 1256.50 area that holds will be bullish, only if the SP starts to trade below the 1256.25 will see a sharp sell off during today’s session, and of course, following the Nasdaq for market direction, has worked out well most of the time.”
Markets are trading in a wild style reacting with huge volatility to any piece of news and without finding a direction. Huge rallies get reversed the next day, and sharp drops does not show follow through. Are the indexes testing last month lows to move higher until the elections or the last leg of this bear campaign has started? Who knows? Yesterday’s huge reversal after a one day huge rally came from KEY resistance areas and placed the indexes once more on a position that in the best case will continue to hold the lows but will be failing to sustain a multi day rally until a triangle formation on the daily charts gets resolved. Once more at the time that I am writing my report, the indexes are already trading sharply higher, maybe another strong opening that this time manages to hold for more than 48 hours. Yesterday’s sell off on the E-mini Nasdaq that settled prices below the July lows, will have to get reversed during today’s trading session or the risk to see the Nasdaq falling to 1665.00 during the coming sessions is for real. The sharp drop on the E-mini Russell which has not broken yet its strong support at 700.00, has posted a lower high on a short term triangle formation between 740.00 and 705.00, and probably will continue to build the pattern until a clear breakout occurs. The Dow should see strong support if it gets near the 11000 posting a double bottom there, and maybe will rally back up to 12000, or it will break lower and fall to 11700. And finally the SP, which also shows lower highs and higher lows on its daily chart, is testing the lower trend line of that triangle formation at 1220.00.
We have been looking for two mid-term scenarios, the first one, the SP reaches the 1320.00-1340.00 area failing there and pushing down strong to make new lows below the 1180.00 level, and the second one, the index falls and test the 1180.00 area for a multi day rally, that finally reaches that 1340.00 area and trades on a side ways pattern for a long time, of this is the case, only countertrend rallies that get reversed after 2-4 days will be the chart formation.
Yesterday’s, lows will have to hold for the indexes to avoid a strong continuation pattern to the downside, and today, that in fact there is not any major economic report should give us the clues for the upcoming sessions. I personally favor a rebound from yesterday’s lows and a consolidation session as markets digest the last moves., no economic reports and tomorrow, the rolling from the September contract to the December contract may keep traders and institutions busy waiting for next Friday’s important retail sales data.
So for today’s session the indexes may consolidate trading the SP between the 1245.50 on the upside and yesterday’s lows, the Nasdaq will have to trade strong above the 1748.00 are to have any chance to move higher.
TODAY’S SESSION
There is initial resistance at 1231.50-1233.00 on the E-mini SP, 1737.50-1739.50 on the Nasdaq and 712.60-714.00 on the Russell. The last wave of selling started yesterday at those levels, so expect some short covering if the indexes trade above them, if that happens, the next resistance areas are at 1236.00-1237.25 on the SP,1745.00-1746.50 on the Nasdaq and 718.60-719.70 on the Russell. The markets will have to be really strong to push above them, if they succeed, then they should be able to reach 1241.00-1243.50 on the SP, 1754.00-1756.00 on the Nasdaq and 724.90-725.80 on the Russell.
.
There in strong support at 1221.75-1220.00, on the SP, 1723.25-1722.00 on the Nasdaq and 708.00-706.20 on the Russell. If the indexes get there and buyers do not jump in immediately, another sharp fall could occur once the indexes break below 1217.00-1215.50 on the SP, 1718.00-1716.50 on the Nasdaq and 703.10-701.90 on the Russell. Those are the last chances for buyers to regroup and try to hold the markets, if they fail, the E-mini SP should be able to reach 1212.00-1210.50 while the Nasdaq and Russell fall to 1708.00-1707.00 and 698.50-697.70 respectively. GOOD LUCK.
Futures and options trading have large potential rewards, but also LARGE POTENTIAL RISK. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy or sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of futures results.
DAY TRADING INVOLVES HIGH RISK AND YOU CAN LOSE A LOT OF MONEY.
U.S. equity indexes fall strong on more financial weakness erasing the previous day gains, S&P down by 3.4%. Pending Home sales fell by 3.2%.
ECONOMIC DATA
10:35 AM Crude Inventories
YESTERDAY’S MARKETS
Markets tumbled on concerns over Lehman’s. After making its daily lows during the Globex session at 1275.00 on the SP, the different indexes moved lower. The E-mini SP opened the session at 1267.00 and pushed lower to 1257.50 from where it bounced back reaching 1269.75, just below our resistance levels. Unable to break higher and with double tops on the other indexes, the SP sold off steadily breaking every support level and reaching 1245.50 closing the open gap from the previous session. After trading sideways for the next two hours and failing to break above 1255.00, a second round of selling pushed the indexes sharply lower. The SP reached 1235.00 bounced back up to 1240.00 and fell to new lows at 1233.00. Another mild short covering rally drove prices up to 1238.50 where another wave of selling pushed the index to its daily lows at 1223.50 at the end of the session and bounced back a bit managing to close a couple of points above fair value. For the day, the E-mini SP ended lower by 40.50 points at 1226.50, the Nasdaq lost 32.00 points ending the session at 1728.75 and the Russell gave back 25.00 points and settled at 709.30. The Dow sold off strongly losing 280 points ending the session at 11230.
MARKET COMMENTARY AND OUTLOOK
Last Friday I wrote:” Yesterday’s wild session has placed the SP on a neutral position that could result in a multi day consolidation between the 1282.00 Globex high and the 1245.00 area. This could last until next Thursday that the September contract will be rolling into December and then maybe on Friday as the retail figures get released move the index back down. However, yesterday weakness on the Nasdaq, its divergence compare to the other indexes, that has been happening during the last few months, has resulted in lower prices for the other indexes, but yesterday “outside day” on that index, that maybe placed a double bottom, also indicates that we could see a consolidation session. This strong rally, that started last Friday, probably is a 1-4 days countertrend move in a falling market that in my opinion should reach the 1180.00 area on the SP during the coming weeks. However, multiple closes above my 1262.00-1264.00 area will negate that pattern and result in a move that drives the SP to the 1320.00-1340.00 levels before another sharp drop. Yesterday’s reaction to the upside, once the E-mini SP traded above the 1256.25 area, and then later above 1261.50 that resulted in a fast late rally give us the clues for today’s strategy, all the time that the SP keeps trading above 1261.00 will indicate higher prices, and a pullback to the 1256.50 area that holds will be bullish, only if the SP starts to trade below the 1256.25 will see a sharp sell off during today’s session, and of course, following the Nasdaq for market direction, has worked out well most of the time.”
Markets are trading in a wild style reacting with huge volatility to any piece of news and without finding a direction. Huge rallies get reversed the next day, and sharp drops does not show follow through. Are the indexes testing last month lows to move higher until the elections or the last leg of this bear campaign has started? Who knows? Yesterday’s huge reversal after a one day huge rally came from KEY resistance areas and placed the indexes once more on a position that in the best case will continue to hold the lows but will be failing to sustain a multi day rally until a triangle formation on the daily charts gets resolved. Once more at the time that I am writing my report, the indexes are already trading sharply higher, maybe another strong opening that this time manages to hold for more than 48 hours. Yesterday’s sell off on the E-mini Nasdaq that settled prices below the July lows, will have to get reversed during today’s trading session or the risk to see the Nasdaq falling to 1665.00 during the coming sessions is for real. The sharp drop on the E-mini Russell which has not broken yet its strong support at 700.00, has posted a lower high on a short term triangle formation between 740.00 and 705.00, and probably will continue to build the pattern until a clear breakout occurs. The Dow should see strong support if it gets near the 11000 posting a double bottom there, and maybe will rally back up to 12000, or it will break lower and fall to 11700. And finally the SP, which also shows lower highs and higher lows on its daily chart, is testing the lower trend line of that triangle formation at 1220.00.
We have been looking for two mid-term scenarios, the first one, the SP reaches the 1320.00-1340.00 area failing there and pushing down strong to make new lows below the 1180.00 level, and the second one, the index falls and test the 1180.00 area for a multi day rally, that finally reaches that 1340.00 area and trades on a side ways pattern for a long time, of this is the case, only countertrend rallies that get reversed after 2-4 days will be the chart formation.
Yesterday’s, lows will have to hold for the indexes to avoid a strong continuation pattern to the downside, and today, that in fact there is not any major economic report should give us the clues for the upcoming sessions. I personally favor a rebound from yesterday’s lows and a consolidation session as markets digest the last moves., no economic reports and tomorrow, the rolling from the September contract to the December contract may keep traders and institutions busy waiting for next Friday’s important retail sales data.
So for today’s session the indexes may consolidate trading the SP between the 1245.50 on the upside and yesterday’s lows, the Nasdaq will have to trade strong above the 1748.00 are to have any chance to move higher.
TODAY’S SESSION
There is initial resistance at 1231.50-1233.00 on the E-mini SP, 1737.50-1739.50 on the Nasdaq and 712.60-714.00 on the Russell. The last wave of selling started yesterday at those levels, so expect some short covering if the indexes trade above them, if that happens, the next resistance areas are at 1236.00-1237.25 on the SP,1745.00-1746.50 on the Nasdaq and 718.60-719.70 on the Russell. The markets will have to be really strong to push above them, if they succeed, then they should be able to reach 1241.00-1243.50 on the SP, 1754.00-1756.00 on the Nasdaq and 724.90-725.80 on the Russell.
.
There in strong support at 1221.75-1220.00, on the SP, 1723.25-1722.00 on the Nasdaq and 708.00-706.20 on the Russell. If the indexes get there and buyers do not jump in immediately, another sharp fall could occur once the indexes break below 1217.00-1215.50 on the SP, 1718.00-1716.50 on the Nasdaq and 703.10-701.90 on the Russell. Those are the last chances for buyers to regroup and try to hold the markets, if they fail, the E-mini SP should be able to reach 1212.00-1210.50 while the Nasdaq and Russell fall to 1708.00-1707.00 and 698.50-697.70 respectively. GOOD LUCK.
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 1249.00-1250.50 1763.75-1765.50 729.70-731.20
Resistance 3 1241.001243.50 1754.00-1756.00 724.90-725.80
Resistance 2 1236.00-1237.25 1745.00-1746.50 718.60-719.70
Resistance 1 1231.50-1233.00 1737.50-1739.50 712.60-714.00
PIVOT 1241.50 1743.25 718.80
Support 1 1221.75-1220.00 1723.25-1722.00 708.00-706.20
Support 2 1217.00-1215.50 1718.00-1716.50 703.10-701.90
Support 3 1212.00-1210.50 1708.00-1707.00 698.50-697.70
Support 4 1208.00-1206.75 1696.00-1694.00 691.10-690.00
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
1358.33 1876.52 795.19
1346.17 1862.48 787.21
1326.50 1839.75 774.30
1306.83 1817.02 761.39
1294.67 1802.98 753.41
1275.00 1780.25 740.50
1255.33 1757.52 727.59
1249.25 1750.50 723.60
1243.17 1743.48 719.61
1223.50 1720.75 706.70
1203.83 1698.02 693.79
1191.67 1683.98 685.81
1172.00 1661.25 672.90
1152.33 1638.52 659.99
1140.17 1624.48 652.01
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 1250.75 1754.50 724.90
AS DAILY LOW 1199.25 1695.00 691.10
S&P NASDAQ RUSSELL
Resistance 4 1249.00-1250.50 1763.75-1765.50 729.70-731.20
Resistance 3 1241.001243.50 1754.00-1756.00 724.90-725.80
Resistance 2 1236.00-1237.25 1745.00-1746.50 718.60-719.70
Resistance 1 1231.50-1233.00 1737.50-1739.50 712.60-714.00
PIVOT 1241.50 1743.25 718.80
Support 1 1221.75-1220.00 1723.25-1722.00 708.00-706.20
Support 2 1217.00-1215.50 1718.00-1716.50 703.10-701.90
Support 3 1212.00-1210.50 1708.00-1707.00 698.50-697.70
Support 4 1208.00-1206.75 1696.00-1694.00 691.10-690.00
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
1358.33 1876.52 795.19
1346.17 1862.48 787.21
1326.50 1839.75 774.30
1306.83 1817.02 761.39
1294.67 1802.98 753.41
1275.00 1780.25 740.50
1255.33 1757.52 727.59
1249.25 1750.50 723.60
1243.17 1743.48 719.61
1223.50 1720.75 706.70
1203.83 1698.02 693.79
1191.67 1683.98 685.81
1172.00 1661.25 672.90
1152.33 1638.52 659.99
1140.17 1624.48 652.01
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 1250.75 1754.50 724.90
AS DAILY LOW 1199.25 1695.00 691.10
Futures and options trading have large potential rewards, but also LARGE POTENTIAL RISK. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy or sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of futures results.
DAY TRADING INVOLVES HIGH RISK AND YOU CAN LOSE A LOT OF MONEY.