DAILY TRADING ADVISORY 15-December-2008

arturo1

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DAILY TRADING ADVISORY 15-December-2008


Automakers bailout plan rejected by the Senate, PPI lower by 2.2%, Retail sales minus 1.8% and President Bush indicating a White House intervention to safe the auto industry resulted in a huge reversal from early losses.


WEEKLY PIVOTS FOR WEEK ENDING 19-December-2008

R3 935.00
R2 910.25
R1 893.75
PP 877.50
S1 860.75
S2 836.00
S3 789.00

ECONOMIC DATA

8:30 AM NY Empire State Index
9;00 AM Net Foreign Purchases
9:15 AM Capacity Utilization
9:15 AM Industrial Production

WEEKLY RECAP

Markets started the week strongly higher as President Elected Obama said during the weekend that he will implement the largest infrastructure spending package since the 1950's, in addition, rumors that an agreement between Congress and the White House for the automakers $15 billion bailout plan was reached gave the markets a strong boost. The indexes traded all the session in positive territory with the E-mini SP reaching almost the 920.00 level and the Dow futures printing the 9000 area on the daily charts. The SP ended higher by 32.25 settling at 904.75, the Nasdaq which showed strength during all the session closed up by 34.00 points at 1212.00 and the Russell ended the day at 480.50 with a big gain of 23.70 points. The Dow closed at 8934, up 298 points. After the huge rally from the previous Friday 817.00 low on the SP to the early Monday’s highs, markets were ready to consolidate the move, Tuesday’s session markets gave back part of their previous gains as disappointing corporate news and another slide on Pending Home sales report kept traders with their feet on the ground, the way out of the current financial crises and recession is full of obstacles, massive job cuts and a gloomy outlook for FedEx resulted in a profit taking session, but with not too much selling pressure. For the day, the SP lost 17.00 points and settled at 889.50, the Nasdaq gave back 15.00 points ending the session at 1217.00 and the Russell closed the session at 569.40, minus 12.10 points. The Dow lost 242 points ending the day at 8691. As the indexes continue to hold most of their gain, Wednesday’s session was also a quite one, more sideways trading action as crude oil raised on lower inventories report and the wholesale inventories numbers showed a decline of 1.1%, early rallies were reversed and sell off attempts found support. The day ended with a positive note despite reports that Rio Tinto is ready to cut 14,000 jobs and GMC failed to become a Bank Holding Co., also mortgage applications were down regardless of the Fed efforts to reduce rates. At the end of the session, 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. Thursday, appeared to be one of the quiets session of the last few months, and early pullback that held just above the previous two session lows, managed to bounce back above the 900.00 area, all this in front of the highest weekly unemployment numbers in the last 26 years, in addition, Procter and Gamble came out with a gloomy outlook for the next year. Oil climbed on weakness in the dollar and bonds continued to build the next bubble. The early narrow range finally got broken to the downside resulting in big loses. The SP lost 20.75 points and settled at 874.50, the Nasdaq ended lower by 29.00 points at 1190.00 and the Russell finished the day at 449.40, minus 24.20 points. The Dow lost 196 points ending the session at 8565. Friday’s story started on Thursday’s night as senate rejected the automakers bailout plan, Asian and European markets fell sharply, the move was reflected in the futures contracts that traded more than 5% lower during the night. Just one hour before the regular trading session started some economic reports were released; the PPI numbers came out lower than expected, minus 2.2% reflecting lower commodity prices, in addition retail sales that was down for a second straight month reflected less buying power, the data showed a 1.8% decrease but was interpreted as better than expected by the markets. Also, President Bush said that TARP funds may be used for the automakers survival plan. The reversal from the Globex lows was impressive with all the indexes making new highs during the last minutes of the session. The SP closed at 885.50, the Nasdaq at 1215.00 and the Russell at 470.00. The Dow recovered for another successful test of the lows closing the session above the key 8600 area and maybe ready for another test of the 9000 mark.


FRIDAY’S MARKETS

A sharply lower Globex session but well above the nightly lows placed the E-mini SP at 850.00 from where it pulled back to 846.00. The index rallied to 858.00 and after posting a small double bottom at 854.00 pushed up to new highs at 867.00. The SP pulled back once more, this time holding above the previous 854.00 area, buyers stepped in and after spending an hour around the 862.00 level, the short covering rally continued reaching 872.00 from where the index pulled back to 858.50. Unable to gain downside momentum and showing signs that the bad news was something of the past, the SP started a trend move reaching 880.00 where the rally lost its momentum. The E-mini SP pulled all the way back to 863.50, rallied to 87450 where sellers steeped in driving prices down to our updated support area at 861.00. After holding, the rally resumed pushing to new intraday highs at 883.00. The SP pulled back, and after trading between 870.00 to 875.00 finally broke up with new short covering into the close that resulted in new intraday highs for all the indexes. At the end of the session, the SP settled at 885.50, up 11.00 points for the session, the Nasdaq finished the day at 1215.00 after gaining 25.00 points and the Russell closed at 470.00, up 21.60 points for the day. The Dow closed at 8629 gaining 64 points during the session.



MARKET COMMENTARY AND OUTLOOK


Last Friday I wrote: “Yesterday failure to hold the 898.50 areas on the SP and 1200.00 on the Nasdaq finally resulted in a strong downside move that not only filled the gap, it also traded much lower. Market condition have deteriorated as fast as the last rally happened, and today’s economic reports to get released before and after the markets opens surely will add volatility to the trading session. The nightly sell off, after the bailout plan was rejected at the Senate, may be overdone, but the pressure from the expected gloomy economic reports may drive the SP near or below the nightly lows, at the moment that I am writing my report, the low in the SP is at 828.75. If that index moves below that level and reach last Friday’s low at 817.00 posting a double bottom, this could be a good buying opportunity. Obviously wild swing that make difficult to trade with tight stops may be part of the scene.” And the previous Friday I cited:” Friday’s huge reversal and rally certainly left many trapped shorts near the lows as markets continued with the same pattern, bad economic data, and early sell off and a recovery that keep the countertrend from last Monday sell off intact. The successful test, with a higher low above the 813.00 last Monday and Tuesday’s double bottom look solid, in particular after the huge loss on the reported nonfarm payrolls. Once more, the key for this rally to continue will be further advance avoiding a sell off during today’s trading session, and by a sell off I mean a lower close, not an intraday profit taking move that is very common in a bear market.”

When I read what o wrote two weeks ago, it seems that this last Friday was a copy of the previous one, and early or nightly sell off, and then a reversal that can be qualified as a very strong rally. After opening the session with strong weakness, markets were able to rebound redefining their triangle formations in the SP and Dow. This triangle pattern usually gets a strong breakout and with the indexes reacting well to the sell off attempts, it’s likely that the next big move will push the indexes higher. Of course the confirmation will be when finally the SP will be able to close two consecutive times above the 905.50-908.00 area that should coincide with the Dow trading just above the 9000 level. The Nasdaq broke below its previous 1200.00 support area posting a double bottom at the 1140.00 level but was able to close above the 1200.00 during last Friday’s session.

The problem, Friday’s late move; the indexes moved strongly up during the last 15 minutes of the session closing above fair value, or we had a lot of shorts that after the failure to move lower ran to cover, or nobody wanted to lose the opportunity of higher prices during today’s session. I suspect, that even if my studies call for higher prices into the end of the month, Monday should be if not a negative session, at least a consolidation of the last two trading sessions with the markets moving in a sideways pattern inside their triangle formation.

It will be really interesting, that during this week, a normally bullish week, with a FOMC rate policy decision and next Friday quadruple witching, and the equity markets won’t be able to break higher. So getting some kind of pullback during todays and maybe the first part of tomorrow’s trading session should be considered a buying opportunity, but traders have to consider that last Friday’s 828.00 Globex low could be tested before markets move up. Despite that the SP could be able to reach my 940.00-960.00 upside objective during this month or early January, this seasonal bullishness is not the end of a bear campaign and in the long term we are in a wide sideways pattern that could lead to new lows in the coming months.

All of this, not taking into account any additional news about the automakers aid plan which has been driving traders and markets a bit crazy.


For today’s trading session, an early rally that fails near the 898.50-901.00 areas on the SP, a weakening Nasdaq against the SP, or getting below the late Friday’s support level seen around 870.00, could indicate weakness that could lead markets lower reaching maybe 8400 on the Dow and 850.00 on the SP. On the other side of the coin, if the markets start with a weak note, look for the 870.00 area on the SP to hold the first time it gets tested, that should result in a bounce to the 880.00 level where sellers will be waiting in order to try and push the indexes lower,





TODAY’S SESSION
There is resistance at 891.00-893.00 on the SP, 1222.50-1224.00 on the Nasdaq and 474.20-475.00 on the Russell. Those areas are key resistance on the way for another test of the 900.00’s on the SP, if the indexes open above them, look for an early test of the next levels at 898.50-901.00 on the SP< 1230.50-1232.00 on the Nasdaq and 479.40-480.80 on the Russell. If those can not hold the uptrend, then the indexes should be able to get to their pivotal levels at 906.00-908.00 on the SP, 1240.00-1242.00 on the Nasdaq and 484.60-485.40 on the Russell. If those get exceeded, in particular during the last two hours of the session, expect the SP to finally print a close above the 905.50 area.

There is support at 880.00-879.00 on the SP, 1206.00-1204.00 on the Nasdaq and 465.80-464.10 on the Russell. An open at these levels not necessary indicates lower prices, it probably means getting back to fair value, but if markets fail to hold there look for additional support at 875.00-873.50 on the SP, 1196.00-1195.00 on the Nasdaq and 459.80-457.90 on the Russell. If those can not hold the profit taking move, look for very strong support at 869.00-868.00 on the SP, 1182.50-1181.00 on the Nasdaq and 452.30-451.00 on the Russell. Those were the late lows and they may hold the first time they get tested, however if the indexes do not react from those levels, look for the critical 860.75-858.75 areas to get tested on the SP. GOOD LUCK.





TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 915.00-917.00 1249.00-1250.50 493.70-495.20
Resistance 3 906.00-908.00 1240.00-1242.00 484.60-485.40
Resistance 2 898.50-901.00 1230.50-1232.00 479.40-480.80
Resistance 1 891.00-893.00 1222.50-1224.00 474.20-475.00
PIVOT 867.00 1189.00 455.80
Support 1 880.00-879.00 1206.00-1204.00 465.80-464.10
Support 2 875.00-873.50 1196.00-1195.00 458.90-457.90
Support 3 869.00-868.00 1182.50-1181.00 452.30-451.00
Support 4 860.75-858.75 1170.00-1169.00 444.80-443.70


S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
953.76 1349.02 545.70
942.49 1329.73 534.90
924.25 1298.50 517.40
906.01 1267.27 499.90
894.74 1247.98 489.10
876.50 1216.75 471.60
858.26 1185.52 454.10
852.63 1175.88 448.70
846.99 1166.23 443.30
828.75 1135.00 425.80
810.51 1103.77 408.30
799.24 1084.48 397.50
781.00 1053.25 380.00
762.76 1022.02 362.50
751.49 1002.73 351.70



DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 914.00 1256.75 493.70
AS DAILY LOW 858.00 1175.00 447.90​




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