DAILY TRADING ADVISORY 10-October-2008
Markets continue to collapse after the coordinated rate reduction fails to create confidence on the markets. Initial Claims as expected. Wholesale Inventories up. IBM tops expectations. Morgan Stanley’s rating may be cut. Goldman’s outlook is negative. Asian stocks plunged following Wall Street debacle.
ECONOMIC DATA
8:30 AM Export Prices
8:30 AM Import Prices
8:30 AM Trade Balance
YESTERDAY’S MARKETS
Markets continued to collapse pushing the U.S. stock indexes down almost another 8%. With an early optimism based on a strong technology sector, the E-mini SP opened on positive territory and reached 1010.00 during the first minutes of the session. With extreme volatile swings, the SP pushed down to 1002.00 and bounced near the early highs where sellers took advantage and pushed the index down to 990.00. Another rebound attempt that failed at the 1000.00 mark resulted in a strong downward push to 963.50, testing the previous session lows. As the Nasdaq continued to hold on positive territory, the SP bounced all the way up to 992.00 where the short covering rally lost its steam. The index fell to 975.00 and traded on a sideways pattern for the next two hours. The E-mini SP moved down to the early lows and after failing to put a double bottom the index collapsed during the last hour of the session reaching 912.00 from where it bounced to the 936.00 mark just to get sold during the last minutes of trading placing its lows at 905.50. For the day, the SP lost 68.50 points ending the day at 912.50, the Nasdaq ended lower by 48 points at 1272.00 and the Russell plunged another 52.70 points and settled at 488.00. The Dow extended its huge losses falling 678 points ending the session at 8579.00
MARKET COMMENTARY AND OUTLOOK
Wednesday I wrote:”Yesterday’s early rally that drove the Dow above the 10000 level and the SP to Tuesday’s breakdown area at 1078.00 and failed to hold, and the later sell off that showed another mini crash in all of the U.S. stock indexes have placed the markets in a situation where much lower prices could be seen as this capitulation move continues. It will take an emergency rate cut by the FED before the opening to see a reversal from yesterday’s move. And when I write about a FED intervention and not my normal technical analysis is because I can not see any logic support areas when everybody is throwing away everything in a market that has already fell 16% in the last three trading sessions. The close below 10000 on the Dow points to a test of the 9000-8700 level and in the SP could reach levels between 945.00 and 920.00. Those levels could be reached during today’s trading session, this index keeps falling 50-60 points a day, but if we are in a total crash there will be not support until the SP reaches the 800 area. Yesterday’s sell off have placed the indexes on their worst levels of the last years despite that the VIX is at historic levels and the markets are extremely oversold. This is a bit worst than going to the dentist. The SP will have to get back above the 1010.50 area and then 1042.00 in order to be able to consider yesterday’s lows or the current 980.00 nightly low as a capitulation that has placed some sort of short term bottom for the markets. This is a situation where joining the masses in their irrational selling or trying to pick a bottom it will only carry losses, professional traders could be joining a move but nobody can stick to a position in this highly volatile environment. I can not discard the possibility of a total crash and I can not discard the chances for a huge relief rally. For more selling to happen, its simple, markets just have to continue acting like a falling knife, but for a rally to come, markets have to react maybe from a “limit down” opening, and even if we consider that we are in a bear market and we see some signs of life, there is huge selling pressure despite the amounts of money sitting on the sidelines. I have been writing that this October will place a low on the markets, and I still believe in it, but this crashing mood seems to have more to go .So, for today’s trading session, if the markets will rally, they have to do it right away as the session starts, that will be the only way for an early proof that yesterday’s late sell off was a capitulation and exhausting move, if that does not happen then an early sell off that reaches at least the 960.00 level could get a late reversal and then if the 1010.00 area gets crossed to the upside buyers could join the move.. You can wonder that at this levels I am not in love with taking a short, yesterday I recommended to sell and early move that fails just below 1078.50 and it worked, but today, I consider that a FED intervention is possible at any moment, so if I take a short position, I will place ultra tight stops and wait for a short covering rally to do it.”
So we got the FED’s intervention by cutting the rates, and we got the relief rally that failed to hold, we also got our 1010.00 area reached yesterday and the following sell off that maintain the markets in a crash mood. This exceptional situation that is taking place on the markets usually kills bulls and bears, the rallies are wild and fast, and the sell off does not respect any support. The continued intervention by the U.S. agencies in their attempt to create confidence has been showing the opposite effect, and until the free market conditions return or the total capitulation happens, every rally will be sold. I don’t know if the announced buying of preferred shares of banks by the treasury will result in a quick recovery of the confidence, not prices, just confidence, but I am starting to feel that the super powers that the Congress gave to Mr. Paulson is another huge mistake, the $700 billion may be already lost in all this desperate measures to stabilize the markets. I just ask my self what’s next.
This last leg of the bear campaign is the faster and is a vertical downward move, when it ended, the rally will be also vertical, and then the markets will trade on a sideways pattern for a long period of time. I have been writing about the possibility to see this move end during October, and I am convince that we are near to its end, near in time not in price. I also wrote that the 800.00 level or a marginal break below that level on the SP may be reached and if that is the fact that brings real panic into the markets, and then the indexes will have adjusted to the economic fundamentals. You have to remember that one of the golden rules call to be greed when everybody is in panic, so a panic sell off that pushes the SP to the 800.00 area could be a great long position despite the enormous fear to be a buyer when people are running to safe their last cents. I would like to see the opposite of what we have been facing the last trading sessions, instead of an early rally and then a late collapse of the markets, an early panic selling that reaches more than limit down on the futures indexes, and then a huge recovery rally that manages to move the markets back to previous settlement, only there, I will look to be a position buyer on a second test of the lows. This move should be close to an end, where the markets will be, maybe around the 800.00, who knows.
For today’s trading session, any huge rally has to be sold, in particular if the SP trades back above the 933.00 area and the breaks lower, stops do not work so well on these trading conditions, but to omit them could be a huge mistake.
I have to insist that these are high risk trading conditions, for both shorts and longs, being and observer and stay on the sidelines could be the best trade.
TODAY’S SESSION
There is resistance at 922.00-924.00 on the SP, 1282.00-1284.00 on the Nasdaq and 495.00-497.20. If those get exceeded expect some short covering up to 933.00-935.00 on the SP, 1296.00-1298.00 on the Nasdaq and 505.50-506.30 on the Russell. Those were the last highs so an early rally to these levels could be a great selling opportunity.
At the moment that I am writing my report, the SP is showing strong support at the 880.00 area, the same is true for the Nasdaq at 1235.00. If those can not hold expect the SP to visit 856.00-855.00 and the Nasdaq to test 1211.50-1209.00. If a rally can not start from those levels, today, a Friday, the final capitulation could bring prices near the 820.00 area on the SP. 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.
Every effort has been made to accurately represent all of our products and it's potential. As with any business there is a risk of loss of capital and there is no guarantee that you will earn any money. The financial markets are risky .Investing is risky. The foregoing has been prepared only and solely for informational purposes and is not a solicitation or an offer to buy or sell any security, option or futures contract. Opinion is based on historical research but there is not guarantee that futures results will be profitable. We are not advocating or recommending trading futures and our services, notes and entry and exit prices to the markets only reflects our opinion an a manner how markets can be traded. We mention many indexes like the S&P, NASDAQ, Russell, Dow Jones as T-Bonds only because they are the most known and liquid markets, and not because we recommend in any way to be traded.
You can lose more than your initial investment.
We are not Brokers, Registered Trading Advisors, Registered Investment Advisors or Commodity Trading Advisors. All the material contained here or in any communication is only for information purposes and part of our thoughts and personal conclusions.
Copyright © by theminitrade.com
Markets continue to collapse after the coordinated rate reduction fails to create confidence on the markets. Initial Claims as expected. Wholesale Inventories up. IBM tops expectations. Morgan Stanley’s rating may be cut. Goldman’s outlook is negative. Asian stocks plunged following Wall Street debacle.
ECONOMIC DATA
8:30 AM Export Prices
8:30 AM Import Prices
8:30 AM Trade Balance
YESTERDAY’S MARKETS
Markets continued to collapse pushing the U.S. stock indexes down almost another 8%. With an early optimism based on a strong technology sector, the E-mini SP opened on positive territory and reached 1010.00 during the first minutes of the session. With extreme volatile swings, the SP pushed down to 1002.00 and bounced near the early highs where sellers took advantage and pushed the index down to 990.00. Another rebound attempt that failed at the 1000.00 mark resulted in a strong downward push to 963.50, testing the previous session lows. As the Nasdaq continued to hold on positive territory, the SP bounced all the way up to 992.00 where the short covering rally lost its steam. The index fell to 975.00 and traded on a sideways pattern for the next two hours. The E-mini SP moved down to the early lows and after failing to put a double bottom the index collapsed during the last hour of the session reaching 912.00 from where it bounced to the 936.00 mark just to get sold during the last minutes of trading placing its lows at 905.50. For the day, the SP lost 68.50 points ending the day at 912.50, the Nasdaq ended lower by 48 points at 1272.00 and the Russell plunged another 52.70 points and settled at 488.00. The Dow extended its huge losses falling 678 points ending the session at 8579.00
MARKET COMMENTARY AND OUTLOOK
Wednesday I wrote:”Yesterday’s early rally that drove the Dow above the 10000 level and the SP to Tuesday’s breakdown area at 1078.00 and failed to hold, and the later sell off that showed another mini crash in all of the U.S. stock indexes have placed the markets in a situation where much lower prices could be seen as this capitulation move continues. It will take an emergency rate cut by the FED before the opening to see a reversal from yesterday’s move. And when I write about a FED intervention and not my normal technical analysis is because I can not see any logic support areas when everybody is throwing away everything in a market that has already fell 16% in the last three trading sessions. The close below 10000 on the Dow points to a test of the 9000-8700 level and in the SP could reach levels between 945.00 and 920.00. Those levels could be reached during today’s trading session, this index keeps falling 50-60 points a day, but if we are in a total crash there will be not support until the SP reaches the 800 area. Yesterday’s sell off have placed the indexes on their worst levels of the last years despite that the VIX is at historic levels and the markets are extremely oversold. This is a bit worst than going to the dentist. The SP will have to get back above the 1010.50 area and then 1042.00 in order to be able to consider yesterday’s lows or the current 980.00 nightly low as a capitulation that has placed some sort of short term bottom for the markets. This is a situation where joining the masses in their irrational selling or trying to pick a bottom it will only carry losses, professional traders could be joining a move but nobody can stick to a position in this highly volatile environment. I can not discard the possibility of a total crash and I can not discard the chances for a huge relief rally. For more selling to happen, its simple, markets just have to continue acting like a falling knife, but for a rally to come, markets have to react maybe from a “limit down” opening, and even if we consider that we are in a bear market and we see some signs of life, there is huge selling pressure despite the amounts of money sitting on the sidelines. I have been writing that this October will place a low on the markets, and I still believe in it, but this crashing mood seems to have more to go .So, for today’s trading session, if the markets will rally, they have to do it right away as the session starts, that will be the only way for an early proof that yesterday’s late sell off was a capitulation and exhausting move, if that does not happen then an early sell off that reaches at least the 960.00 level could get a late reversal and then if the 1010.00 area gets crossed to the upside buyers could join the move.. You can wonder that at this levels I am not in love with taking a short, yesterday I recommended to sell and early move that fails just below 1078.50 and it worked, but today, I consider that a FED intervention is possible at any moment, so if I take a short position, I will place ultra tight stops and wait for a short covering rally to do it.”
So we got the FED’s intervention by cutting the rates, and we got the relief rally that failed to hold, we also got our 1010.00 area reached yesterday and the following sell off that maintain the markets in a crash mood. This exceptional situation that is taking place on the markets usually kills bulls and bears, the rallies are wild and fast, and the sell off does not respect any support. The continued intervention by the U.S. agencies in their attempt to create confidence has been showing the opposite effect, and until the free market conditions return or the total capitulation happens, every rally will be sold. I don’t know if the announced buying of preferred shares of banks by the treasury will result in a quick recovery of the confidence, not prices, just confidence, but I am starting to feel that the super powers that the Congress gave to Mr. Paulson is another huge mistake, the $700 billion may be already lost in all this desperate measures to stabilize the markets. I just ask my self what’s next.
This last leg of the bear campaign is the faster and is a vertical downward move, when it ended, the rally will be also vertical, and then the markets will trade on a sideways pattern for a long period of time. I have been writing about the possibility to see this move end during October, and I am convince that we are near to its end, near in time not in price. I also wrote that the 800.00 level or a marginal break below that level on the SP may be reached and if that is the fact that brings real panic into the markets, and then the indexes will have adjusted to the economic fundamentals. You have to remember that one of the golden rules call to be greed when everybody is in panic, so a panic sell off that pushes the SP to the 800.00 area could be a great long position despite the enormous fear to be a buyer when people are running to safe their last cents. I would like to see the opposite of what we have been facing the last trading sessions, instead of an early rally and then a late collapse of the markets, an early panic selling that reaches more than limit down on the futures indexes, and then a huge recovery rally that manages to move the markets back to previous settlement, only there, I will look to be a position buyer on a second test of the lows. This move should be close to an end, where the markets will be, maybe around the 800.00, who knows.
For today’s trading session, any huge rally has to be sold, in particular if the SP trades back above the 933.00 area and the breaks lower, stops do not work so well on these trading conditions, but to omit them could be a huge mistake.
I have to insist that these are high risk trading conditions, for both shorts and longs, being and observer and stay on the sidelines could be the best trade.
TODAY’S SESSION
There is resistance at 922.00-924.00 on the SP, 1282.00-1284.00 on the Nasdaq and 495.00-497.20. If those get exceeded expect some short covering up to 933.00-935.00 on the SP, 1296.00-1298.00 on the Nasdaq and 505.50-506.30 on the Russell. Those were the last highs so an early rally to these levels could be a great selling opportunity.
At the moment that I am writing my report, the SP is showing strong support at the 880.00 area, the same is true for the Nasdaq at 1235.00. If those can not hold expect the SP to visit 856.00-855.00 and the Nasdaq to test 1211.50-1209.00. If a rally can not start from those levels, today, a Friday, the final capitulation could bring prices near the 820.00 area on the SP. GOOD LUCK.
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 961.00-963.00 1338.00-1342.50 538.80-539.50
Resistance 3 943.00-945.50 1312.00-1313.50 525.10-526.70
Resistance 2 933.00-935.00 1296.00-1298.00 504.50-506.30
Resistance 1 922.00-924.00 1282.00-1284.00 495.00-497.20
PIVOT 942.50 1302.50 511.50
Support 1 893.00-891.00 1261.00-1258.00 480.00-478.20
Support 2 880.00-878.00 1247.50-1245.00 470.20-469.00
Support 3 856.00-855.00 1232.00-1230.00 460.80-458.40
Support 4 838.50-836.00 1211.50-1209.00 445.00-442.50
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
1179.08 1551.79 688.24
1154.42 1525.71 669.86
1114.50 1483.50 640.10
1074.58 1441.29 610.34
1049.92 1415.21 591.96
1010.00 1373.00 562.20
970.08 1330.79 532.44
957.75 1317.75 523.25
945.42 1304.71 514.06
905.50 1262.50 484.30
865.58 1220.29 454.54
840.92 1194.21 436.16
801.00 1152.00 406.40
761.08 1109.79 376.64
736.42 1083.71 358.26
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 961.25 1322.50 525.10
AS DAILY LOW 856.75 1212.00 447.20
S&P NASDAQ RUSSELL
Resistance 4 961.00-963.00 1338.00-1342.50 538.80-539.50
Resistance 3 943.00-945.50 1312.00-1313.50 525.10-526.70
Resistance 2 933.00-935.00 1296.00-1298.00 504.50-506.30
Resistance 1 922.00-924.00 1282.00-1284.00 495.00-497.20
PIVOT 942.50 1302.50 511.50
Support 1 893.00-891.00 1261.00-1258.00 480.00-478.20
Support 2 880.00-878.00 1247.50-1245.00 470.20-469.00
Support 3 856.00-855.00 1232.00-1230.00 460.80-458.40
Support 4 838.50-836.00 1211.50-1209.00 445.00-442.50
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
1179.08 1551.79 688.24
1154.42 1525.71 669.86
1114.50 1483.50 640.10
1074.58 1441.29 610.34
1049.92 1415.21 591.96
1010.00 1373.00 562.20
970.08 1330.79 532.44
957.75 1317.75 523.25
945.42 1304.71 514.06
905.50 1262.50 484.30
865.58 1220.29 454.54
840.92 1194.21 436.16
801.00 1152.00 406.40
761.08 1109.79 376.64
736.42 1083.71 358.26
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 961.25 1322.50 525.10
AS DAILY LOW 856.75 1212.00 447.20
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.
Every effort has been made to accurately represent all of our products and it's potential. As with any business there is a risk of loss of capital and there is no guarantee that you will earn any money. The financial markets are risky .Investing is risky. The foregoing has been prepared only and solely for informational purposes and is not a solicitation or an offer to buy or sell any security, option or futures contract. Opinion is based on historical research but there is not guarantee that futures results will be profitable. We are not advocating or recommending trading futures and our services, notes and entry and exit prices to the markets only reflects our opinion an a manner how markets can be traded. We mention many indexes like the S&P, NASDAQ, Russell, Dow Jones as T-Bonds only because they are the most known and liquid markets, and not because we recommend in any way to be traded.
You can lose more than your initial investment.
We are not Brokers, Registered Trading Advisors, Registered Investment Advisors or Commodity Trading Advisors. All the material contained here or in any communication is only for information purposes and part of our thoughts and personal conclusions.
Copyright © by theminitrade.com