DAILY TRADING ADVISORY 21-November-2008
Initial Claims at 16 year high. Leading indicators and Philadelphia fed worst than expected, Prince Alwaleed bin Tal increasing his stake in Citigroup, GMAC applying for status as bank to get some of the 700 billion, lower interest in Swiss and an compromise to help the automakers that will have to get resolved during December resulted in an rollercoaster session with and early rally and a late collapse reaching new multi year lows.
ECONOMIC DATA
None
YESTERDAY’S MARKET
After testing the 790.00 area during the Globex session and before the release of the Initial claims data the SP bounced to 802.00 just to get sold strongly during the firs hour of the session. The E-mini SP tested the 784.00 area bounced to 794.50 and sold off strongly reaching almost our projected 770.00 low, the market held at 774.25 from where it bounced strongly reaching once more the 794.50 area, it pulled back 10 points and rallied to new intraday highs at 803.50. As the wild swings continued the SP reached 808.50 sold off once more to 785.00 and pushed up strongly reaching 815.50. Another 10 points pullback resulted in a quick run to 820.75 just to get sold to 791.50. Another run to 805.25 printed the last high from where the markets started a downward vertical move making the daily lows just at the end of the session. For the day, the SP lost another 64.25 points ending the session at 748.25, the Nasdaq ended lower by 53.00 points and settled at 1039.50 and the Russell lost 30.80 points and finished the session at 382.30. The Dow lost another 445 points and closed the day at 7552.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote:”Many occasions I have wrote the lack of importance of a one day move, no follow through, no evidence of trending, and that is what happened yesterday’s session. So, now we have in the charts a struggling sideways pattern developed by several tests of the previous low with several wild rallies that resulted in double tops, those double tops in a bear market usually indicate lower prices, and a wide range session that finally broke to new lows. That leaves open the possibility of another down wide day session, a capitulation that pushes the index down to 770.00 or lower. The other scenario is to consider yesterday’s sell off, that closed near the daily lows on the broad market indexes as a one day new low that could be reversed during today’s trading session, if that is the case, the 800.00 area on the SP, if visited, will have to hold and give way to a multi day rally. I am not so convinced, any countertrend move that does not last more than 4 days should be considered a natural bounce from oversold conditions, and of course, until the SP does not close twice above the huge and pivotal 866.00 level, there are not chances to move higher. Going back to the 770.00 level, that area is more or less the 50% Fibonacci retracement from the all time highs, and in all the other bear markets that 50% has held. That does not mean that this bear market is as the other ones, but there is a good chance that this area holds the first time it gets tested. That could be the panic sell off that the markets need to post a “low”, even with and intraday level below that price, until then only a 12 days rally or the SP above the 915.00 level will indicate that a low has been posted.
Yesterday’s lows, at critical support levels will have to hold during the initial 90 minutes of the session or get reversed from lower prices, if that not happens, then another down leg that drive prices much lower will be seen for tomorrows option expiration. Remember that at any moment we could see the indexes initiate a fast rally that runs in a vertical move.”
The continuing collapse on the U.S. markets continues to show no mercy, the early and promissory rally from levels just above the critical 770.00 level seemed to be the initial move of the rally that we have been expecting in order to call a short term low. Is this last two days huge sell off a consequence of today’s option expiration and all the put sellers are already out of their positions? We don’t know, but certainly the picture looks ugly. Is yesterday’s late sell off with the closing at the lows the final capitulation and exhausting this fast last leg down? Every time that the indexes close on the lows, there is a chance. For this scenario to be true, at least, the index will have to close above yesterday’s highs at 820.75. Until that happens chances that this fast downtrend has not reached a bottom still exist. We will have to look for early strength that can be sustained during all the session, which leave the late shorts trapped in order to force them to cover during this option expiration session. The other scenario is to look for support, first at 734.50 and then at 710.00 from where the SP gets strongly reversed triggering a 100 point rally. It may sound crazy, but an intraday 100 point rally is possible under this circumstances. Technically, yesterday’s sell off should result in a bounce during today’s trading session, but the fact that the markets are trading below their last importance highs, 915.00 on the SP and 9200 on the Dow opens the door for a continuation of this leg down that once it breaks the last important support at 710.00 on the SP and 7000 on the Dow will easily push lower to the 600.00 area on the SP and the 6000 level on the Dow. So every rally will continue to be a selling opportunity, I am starting to get convinced that finally, during the rest of the year, or next year, the indexes will test those levels. However, on our short term projection, a huge bear market rally of approximately 200 points on the SP that results in a “suckers rally” could not be ruled out.
Yesterday’s break of the 50% retracement of the highs on the Dow is something that was only seen during 1929, so we could see today an attempt to get back above that level, take into consideration that the extension of this last leg down can not be determinate, but at any moment this move will be completed and the indexes will post a strong relief rally. However to get a confirmation that this move has been completed, the markets will have to sustain a rally that holds for more than 7 sessions, or another wide range down day that reaches the 710.00 area as an intraday low and a huge reversal during the same session.
If the current pattern will continue, we should see the early strength given way to another 60 points sell off, but at some moment that pattern will fail to repeat and the sell off from and early upside move will only test the daily lows and post a strong recovery rally. Remember that everybody is not playing the same side, shorting the rallies, and that will have to give way to “the mother” of all the short covering rallies.
I personally do not trade during option expiration days, they have the tendency to fool shorts and longs, and with the current volatility they can result in trading sessions where the support and resistance levels, simply do not work, however, I will be looking for any rally that fail near the 770.00-774.00 area as a selling opportunity and a sell off that successful test yesterday’s lows as a good long entry. A new marginal low that recovers will also give some life to these beaten markets.
.
TODAY’S SESSION
We have initial resistance at 756.00-758.00 on the SP, 1052.00-1054.00 on the Nasdaq and 385.00-386.20 on the Russell. At the moment that I am writing my report, markets are already trading above them, so they should offer initial support. Trading above them indicates a test of yesterday’s key levels at 764.00-766.00 on the SP, 1063.00-1065.00 on the Nasdaq and 389.90-391.80 on the Russell. Nothing good will happen if those areas are not strongly exceeded, so be ready for the rally to fail there, if that happens the objective for a down move could be as much as 60 points. Nut if the markets are strong and yesterday’s break below the 770.00 area in the SP is a false break, then the indexes should push higher reaching 769.50-771.00 on the SP, 1077.00-1079.00 on the Nasdaq and 401.10-402.20 on the Russell. Those levels could also get reversed, so beware of failure down there. If finally we’ll see a positive close tie up your sit belts and enjoy a strong short covering rally.
Initial support is below yesterday’s late lows, 743.00-741.00 on the SP, 1031.00-1030 on the Nasdaq and 378.80-277.60 on the Russell, if those levels hold, look for a 30 points rally on the SP. However, if those get broken, the initial downside move should push the markets lower, 734.00-732.50 on the SP, 1018.00 on the Nasdaq and 374.20-373.50 on the Russell. Those areas are weekly support levels, so look for them to hold the first time they get tested. If the markets continues to show this fast downward move, the 724.00-722.00 levels on the SO and 1008.00-1006.50 and 370.00-368.60 on the Nasdaq and Russell respectively are the last support before the SP found some floor at the 710.00 area. 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
Initial Claims at 16 year high. Leading indicators and Philadelphia fed worst than expected, Prince Alwaleed bin Tal increasing his stake in Citigroup, GMAC applying for status as bank to get some of the 700 billion, lower interest in Swiss and an compromise to help the automakers that will have to get resolved during December resulted in an rollercoaster session with and early rally and a late collapse reaching new multi year lows.
ECONOMIC DATA
None
YESTERDAY’S MARKET
After testing the 790.00 area during the Globex session and before the release of the Initial claims data the SP bounced to 802.00 just to get sold strongly during the firs hour of the session. The E-mini SP tested the 784.00 area bounced to 794.50 and sold off strongly reaching almost our projected 770.00 low, the market held at 774.25 from where it bounced strongly reaching once more the 794.50 area, it pulled back 10 points and rallied to new intraday highs at 803.50. As the wild swings continued the SP reached 808.50 sold off once more to 785.00 and pushed up strongly reaching 815.50. Another 10 points pullback resulted in a quick run to 820.75 just to get sold to 791.50. Another run to 805.25 printed the last high from where the markets started a downward vertical move making the daily lows just at the end of the session. For the day, the SP lost another 64.25 points ending the session at 748.25, the Nasdaq ended lower by 53.00 points and settled at 1039.50 and the Russell lost 30.80 points and finished the session at 382.30. The Dow lost another 445 points and closed the day at 7552.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote:”Many occasions I have wrote the lack of importance of a one day move, no follow through, no evidence of trending, and that is what happened yesterday’s session. So, now we have in the charts a struggling sideways pattern developed by several tests of the previous low with several wild rallies that resulted in double tops, those double tops in a bear market usually indicate lower prices, and a wide range session that finally broke to new lows. That leaves open the possibility of another down wide day session, a capitulation that pushes the index down to 770.00 or lower. The other scenario is to consider yesterday’s sell off, that closed near the daily lows on the broad market indexes as a one day new low that could be reversed during today’s trading session, if that is the case, the 800.00 area on the SP, if visited, will have to hold and give way to a multi day rally. I am not so convinced, any countertrend move that does not last more than 4 days should be considered a natural bounce from oversold conditions, and of course, until the SP does not close twice above the huge and pivotal 866.00 level, there are not chances to move higher. Going back to the 770.00 level, that area is more or less the 50% Fibonacci retracement from the all time highs, and in all the other bear markets that 50% has held. That does not mean that this bear market is as the other ones, but there is a good chance that this area holds the first time it gets tested. That could be the panic sell off that the markets need to post a “low”, even with and intraday level below that price, until then only a 12 days rally or the SP above the 915.00 level will indicate that a low has been posted.
Yesterday’s lows, at critical support levels will have to hold during the initial 90 minutes of the session or get reversed from lower prices, if that not happens, then another down leg that drive prices much lower will be seen for tomorrows option expiration. Remember that at any moment we could see the indexes initiate a fast rally that runs in a vertical move.”
The continuing collapse on the U.S. markets continues to show no mercy, the early and promissory rally from levels just above the critical 770.00 level seemed to be the initial move of the rally that we have been expecting in order to call a short term low. Is this last two days huge sell off a consequence of today’s option expiration and all the put sellers are already out of their positions? We don’t know, but certainly the picture looks ugly. Is yesterday’s late sell off with the closing at the lows the final capitulation and exhausting this fast last leg down? Every time that the indexes close on the lows, there is a chance. For this scenario to be true, at least, the index will have to close above yesterday’s highs at 820.75. Until that happens chances that this fast downtrend has not reached a bottom still exist. We will have to look for early strength that can be sustained during all the session, which leave the late shorts trapped in order to force them to cover during this option expiration session. The other scenario is to look for support, first at 734.50 and then at 710.00 from where the SP gets strongly reversed triggering a 100 point rally. It may sound crazy, but an intraday 100 point rally is possible under this circumstances. Technically, yesterday’s sell off should result in a bounce during today’s trading session, but the fact that the markets are trading below their last importance highs, 915.00 on the SP and 9200 on the Dow opens the door for a continuation of this leg down that once it breaks the last important support at 710.00 on the SP and 7000 on the Dow will easily push lower to the 600.00 area on the SP and the 6000 level on the Dow. So every rally will continue to be a selling opportunity, I am starting to get convinced that finally, during the rest of the year, or next year, the indexes will test those levels. However, on our short term projection, a huge bear market rally of approximately 200 points on the SP that results in a “suckers rally” could not be ruled out.
Yesterday’s break of the 50% retracement of the highs on the Dow is something that was only seen during 1929, so we could see today an attempt to get back above that level, take into consideration that the extension of this last leg down can not be determinate, but at any moment this move will be completed and the indexes will post a strong relief rally. However to get a confirmation that this move has been completed, the markets will have to sustain a rally that holds for more than 7 sessions, or another wide range down day that reaches the 710.00 area as an intraday low and a huge reversal during the same session.
If the current pattern will continue, we should see the early strength given way to another 60 points sell off, but at some moment that pattern will fail to repeat and the sell off from and early upside move will only test the daily lows and post a strong recovery rally. Remember that everybody is not playing the same side, shorting the rallies, and that will have to give way to “the mother” of all the short covering rallies.
I personally do not trade during option expiration days, they have the tendency to fool shorts and longs, and with the current volatility they can result in trading sessions where the support and resistance levels, simply do not work, however, I will be looking for any rally that fail near the 770.00-774.00 area as a selling opportunity and a sell off that successful test yesterday’s lows as a good long entry. A new marginal low that recovers will also give some life to these beaten markets.
.
TODAY’S SESSION
We have initial resistance at 756.00-758.00 on the SP, 1052.00-1054.00 on the Nasdaq and 385.00-386.20 on the Russell. At the moment that I am writing my report, markets are already trading above them, so they should offer initial support. Trading above them indicates a test of yesterday’s key levels at 764.00-766.00 on the SP, 1063.00-1065.00 on the Nasdaq and 389.90-391.80 on the Russell. Nothing good will happen if those areas are not strongly exceeded, so be ready for the rally to fail there, if that happens the objective for a down move could be as much as 60 points. Nut if the markets are strong and yesterday’s break below the 770.00 area in the SP is a false break, then the indexes should push higher reaching 769.50-771.00 on the SP, 1077.00-1079.00 on the Nasdaq and 401.10-402.20 on the Russell. Those levels could also get reversed, so beware of failure down there. If finally we’ll see a positive close tie up your sit belts and enjoy a strong short covering rally.
Initial support is below yesterday’s late lows, 743.00-741.00 on the SP, 1031.00-1030 on the Nasdaq and 378.80-277.60 on the Russell, if those levels hold, look for a 30 points rally on the SP. However, if those get broken, the initial downside move should push the markets lower, 734.00-732.50 on the SP, 1018.00 on the Nasdaq and 374.20-373.50 on the Russell. Those areas are weekly support levels, so look for them to hold the first time they get tested. If the markets continues to show this fast downward move, the 724.00-722.00 levels on the SO and 1008.00-1006.50 and 370.00-368.60 on the Nasdaq and Russell respectively are the last support before the SP found some floor at the 710.00 area. GOOD LUCK.
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 789.00-791.00 1089.00-1091.00 406.80-408.10
Resistance 3 769.50-771.00 1077.00-1079.00 401.10-402.20
Resistance 2 764.00-766.00 1063.00-1065.50 389.90-391.80
Resistance 1 756.00-758.00 1052.00-1054.00 385.00-386.20
PIVOT 771.25 1062.00 393.20
Support 1 743.00-741.00 1031.00-1030.00 378.80-377.60
Support 2 734.00-732.50 1018.00-1016.00 374.20-373.50
Support 3 724.00-722.00 1008.00-1006.50 370.00-368.60
Support 4 710.00-708.50 995.00-993.00 361.30-359.90
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
943.31 1250.51 479.51
925.44 1230.74 470.49
896.50 1198.75 455.90
867.56 1166.76 441.31
849.69 1146.99 432.29
820.75 1115.00 417.70
791.81 1083.01 403.11
782.88 1073.13 398.60
773.94 1063.24 394.09
745.00 1031.25 379.50
716.06 999.26 364.91
698.19 979.49 355.89
669.25 947.50 341.30
640.31 915.51 326.71
622.44 895.74 317.69
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 784.50 1077.25 400.00
AS DAILY LOW 708.75 993.50 361.80
S&P NASDAQ RUSSELL
Resistance 4 789.00-791.00 1089.00-1091.00 406.80-408.10
Resistance 3 769.50-771.00 1077.00-1079.00 401.10-402.20
Resistance 2 764.00-766.00 1063.00-1065.50 389.90-391.80
Resistance 1 756.00-758.00 1052.00-1054.00 385.00-386.20
PIVOT 771.25 1062.00 393.20
Support 1 743.00-741.00 1031.00-1030.00 378.80-377.60
Support 2 734.00-732.50 1018.00-1016.00 374.20-373.50
Support 3 724.00-722.00 1008.00-1006.50 370.00-368.60
Support 4 710.00-708.50 995.00-993.00 361.30-359.90
S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
943.31 1250.51 479.51
925.44 1230.74 470.49
896.50 1198.75 455.90
867.56 1166.76 441.31
849.69 1146.99 432.29
820.75 1115.00 417.70
791.81 1083.01 403.11
782.88 1073.13 398.60
773.94 1063.24 394.09
745.00 1031.25 379.50
716.06 999.26 364.91
698.19 979.49 355.89
669.25 947.50 341.30
640.31 915.51 326.71
622.44 895.74 317.69
DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 784.50 1077.25 400.00
AS DAILY LOW 708.75 993.50 361.80
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