DAILY TRADING ADVISORY 11-December-2008

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DAILY TRADING ADVISORY 11-December-2008

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Rollover day is today 11 December 2008
OUR NUMBERS ARE BASED ON THE MARCH CONTRACTS
E-mini SP ESH9 E-mini Nasdaq NQH9 E-mini Russell TFH9​

Rio Tinto to cut 14,000 jobs, GM fails to become a Bank Holding Co., Mortgage applications down and a bailout agreement to be voted during the next few days result in a positive session.


ECONOMIC DATA

8:30 AM Initial Claims
8:30 AM Export Prices
8:30 AM Import Prices
8:30 AM Trade Balance


YESTERDAY’S MARKET

A quite Globex session resulted in a higher opening for the U.S. equity markets. The E-mini SP started the session at 898.00 and pushed up just to the 900.00 area where some early selling pushed the index down to 892.00. The SP managed to hold and rallied all the way to 904.75. The SP pulled down to 901.00, bounced just above our intraday 902.75 pivot point and sold off to 893.25. After holding just there the indexes rallied once more, the SP rallied all the way up to 908.75. After failing to break above the pivotal level, the SP sold off all the way down to 895.00 where support came in. The index bounced up to 903.75 just to get sold. The SP fell once more, this time to our updated support area just above 892.00. a feeble bounce that failed just below the previous 895.50 support area resulted in a move to new intraday lows, the SP reached 886.00, bounced to 891.50 and sold off again to 884.50, Tuesday’s low. The index bounced four points from that level, pushed down posting a higher low and rallied to 893.50, pulled back to 888.50 and bounced strong to 898.50 before pulling back once more to 892.00 where buyers stepped in pushing higher to 902.00 from where the index pulled a few points into the close. For the day, the SP added 6.25 points and settled at 895.75, the Nasdaq, closed unchanged for the session at 1217.00 and the Russell closed up by 7.30 points at 575.70. The Dow managed to gain 70 points and settled at 8761.


MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote:” We were expecting a consolidation of the last huge rally and we considered that the SP would be able to close the open gap at 879.50, however good support was found just five points above that area. Yesterday’s pullback was something traders were expecting, and the rally should be able to continue on its way to the 940.00-960.00 levels on the SP. I am a bit disappointed that the index did not closed the gap, if that not happens today, it will happened in the future. As there is more talking about the automakers bailout plan, the markets will continue to react to outsides news, so is highly recommended to add a stop loss order to every open position. Yesterday’s failure to break above Monday’s high on the SP and to trade above the 9000 level on the Dow, could result in another negative session, despite that the markets could be building a base for a Santa Claus rally. If we consider that the last rally has a 100 point extension on the SP, and that the pivotal 861.00 area or a bit lower could be reached during the next couple of days, if we see additional selling pressure, that could set up my expected rally to the 940.00-960.00 area if we have a symmetrical move. So unless outside news that result in another huge short covering move pushes the markets up during today’s session, I will consider every rally as a selling opportunity, of course the SP will have to hold below the 908.50-911.50 resistance band or the rally will happen before a substantial pull back. The first sign that the markets will continue to move lower, could come from weakness on the Nasdaq, so keep a close eye on the strong support around 1200.00-1198.00, if those levels get broken the other indexes should follow the move. On the other side, if the SP manages to break above the 911.50 area and the Dow finally breaks 9000, more strength could be seen. In this scenario, another day of consolidation could also happen. Remember that traders will be concentrated in the rollover from the December to the March contracts, and that the next two sessions are full of economic reports. For today’s trading session, a higher opening that holds below my 910.00-912.00 resistance area could result in a huge selling opportunity.”.



The fact that the SP has not been able to close above the 908.50 area and has not reached 879.50 to close the open gap left from Monday’s higher opening, still have the indexes in a consolidation pattern of the last rally. The early attempts to move higher, that mostly have been leaded by the strength on the Nasdaq have resulted in failure to continue and close above the indicated level, however, the markets have continued to show strong support at the current lows and the selling has been limited to intraday attempts to close the open gap. This should be seen as a positive sign; also, the Nasdaq has been able to hold above the 1202.00-1198.00 support levels.

This range bounded trading action holding above the last week highs could indicate that the trend remains in a strong position. BUT, there is a gap to be closed, the Nasdaq and Russell has been reversed from theirs early advances, and the Dow was clearly reversed from the 9000 after testing that level during Monday’s trading session, this keeps open the possibility of a wide range down session if the last two days lows fail to hold, and that can happen during today’s trading session and continue also tomorrow as the main weekly economic reports get released.

So we have to follow what the markets do, and that means to follow a possible trend move that could happen today, the areas to watch are the 889.50 level on the SP, if that markets starts to trade below that level, the shorts could gain control and finally succeed to push markets lower, a great confirmation of the move will be the Nasdaq below the 1200 area and the Dow below the 8630 level, that could result in a sell off that carries the SP at least to the low 70’s. On the other side of the coin, if the SP gets above 898.75 and confirm the move trading above our 902.75 short term pivot, the way will be open for another test of the recent highs.


In conclusion, until the current ranges get broken, despite our slightly bearish bias as a consequence of the open gap, look for this range to continue and hold, selling the rallies when they get exhausted and buying near the current lows. It is very important that if the SP won’t be able to close the gap, the indexes should be considered in a strong position and ready for a move to our anticipated 940.00-960.00 areas on the SP which could result in a huge selling opportunity. GOOD LUCK.






TODAY’S SESSION

Initial resistance is at 898.50-899.50 on the SP, 1223.00-1225.00 on the Nasdaq and 475.40-476.80 on the Russell. If those levels get tested and reversed, probably the SP will reverse around 20 points from that level, but trading above them should be seen as a positive sign and could push the markets higher to 907.00-908.00 on the SP, 1230.00-1231.50 on the Nasdaq and 480.00-481.00 on the Russell. If those are reached beware of a possible failure, but if the indexes want to show their muscles, the next areas at 912.00-913.50 on the SP, 1238.00-1239.50 on the Nasdaq and 485.80-486.50 should get tested before the session is over.

There is some support at 893.00-891.50 on the SP, 1213.00-1211.00 on the Nasdaq and 472.00-471.00 on the Russell. If the markets are OK, they should hold near to those areas and bounce, however, if those can not hold, at least a test of the last two days lows at 887.00-886.00 on the SP, 1206.00-1204.00 on the Nasdaq and 469.80-468.70 on the Russell could be seen. That will be the third test of those areas, if they can not hold, then the only levels to avoid a strong sell off would be 880.50-879.50 on the SP, 1196.00-1194.00 on the Nasdaq and 464.70-464.20 on the Russell.



TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 919.00-920.00 1255.00-1257.00 489.90-490.40
Resistance 3 912,00-913.50 1238.00-1239.50 485.80-486.50
Resistance 2 907.00-908.00 1230.00-1231.50 480.00-481.00
Resistance 1 898.50-899.50 1223.00-1225.00 475.40-476.80
PIVOT 895.50 1221.75 472.10
Support 1 893.00-891.50 1213.00-1211.00 472.00-471.30
Support 2 887.00-886.00 1206.00-1204.00 469.80-468.70
Support 3 880.50-879.50 1196.00-1194.50 464.70-464.20
Support 4 872.00-870.25 1183.00-1181.00 458.80-457.00


S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
945.37 1300.56 504.26
939.88 1291.94 500.64
931.00 1278.00 494.80
922.12 1264.06 488.96
916.63 1255.44 485.34
907.75 1241.50 479.50
898.87 1227.56 473.66
896.13 1223.25 471.85
893.38 1218.94 470.04
884.50 1205.00 464.20
875.62 1191.06 458.36
870.13 1182.44 454.74
861.25 1168.50 448.90
852.37 1154.56 443.06
846.88 1145.94 439.44



DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 913.50 1230.25 476.10
AS DAILY LOW 889.00 1193.75 460.80​

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