DAILY TRADING ADVISORY 19-December-2008

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DAILY TRADING ADVISORY 19-December-2008


President elected Obama could go for an ambitious $850 billion stimulus plan. Initial Claims lower than expected and Philadelphia Fed at its lowest levels since 1990, oil continued collapse and President Bush considering an orderly bankruptcy of the automakers result in a strong sell off for the U.S equity markets.

ECONOMIC DATA

None

YESTERDAY’S MARKET

A quite Globex session resulted in a positive opening. The E-mini SP started the session at 907.00 from where it pulled back to 903.50 and bounced to 909.00 where sellers stepped in pushing the index down to 898.25. As traders waited for the release of the economic numbers, the SP held the early lows and bounced to 906.25. Another sell off attempt failed to make new lows and the SP bounced back to 909.00. With volumes on the light side, the indexes did not gain to momentum to break higher. The SP pulled back to 901.25 but once more was able to hold. As the markets continue to trade in a sideways pattern, the indexes bounced back once more and pulled back trading in a narrow range. Finally the indexes broke down, the SP reached 894.25 but after a few minutes failed to hold and pushed all the way lower to 885.50 from where it bounced back to 893.50 and collapsed during the last hour of the session, the SP reached 873.50. As the trading session continued, the SP bounced to 883.50, tested 878.50 and rallied very strong into the end of the session in a short covering rally that managed to get the Nasdaq almost to the unchanged level and the Russell to a positive close. For the day, the SP ended lower by 11.00 points and settled at 892.00, the Nasdaq lost 3.00 points ending the session at 1225.50 and the Russell finished higher by 2.50 points at 485.10, all of them well above fair value. The Dow lost 219 points closing at 8604 but the Dow futures contract lost only 96 points.
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MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote:” Yesterday’s consolidating session and erratic conditions indicates the lack of momentum in this artificial short term rally generated by the recent rate cut, expectations about the automakers bailout plan and possible stimulus package to be released next month, all this together with the “Santa” effect where everybody calls for a seasonal rally may keep this market afloat on this struggling upside move, that maybe, will push the SP to the 940.00-960.00 level. However, there is a lot of pending fund liquidations and deleveraging is still present in the markets. So, despite the fact that the market should be able to try and move a bit higher, it will set up another mid-term short opportunity that probably will result in a new low, how deep will the markets go? We’ll get the answer once the recent rally gets exhausted. The Dow and SP each traded quietly sideways during the session, as resistance continues to be a factor. So, for this rally to continue, the recent highs will have to get exceeded with strong momentum. If the markets fail to push higher, then the rally that I was expecting to reach at least the 940.00 area on the SP and 9400 on the Dow, will just be another “Santa” dream.”


Yesterday’s session started with relatively small trading volumes and continued to consolidate the last rally, the highs were done during the Globex session and the indexes managed to hold the first half of the trading session. The Russell printed a double top on the daily charts signaling a top for this move. Later the markets simply collapsed in a move that could be related to option expiration, but in fact, the markets failed to break above the recent resistance areas. I still believe in my “Christmas dream” and I still consider that my expected “Santa’s” rally will happen, but I also have been writing that this countertrend rally was not due to be a vertical rally and that it will be just a huge selling opportunity, however, if this rally won’t happen, then the markets are weaker then I thought and will indicate that Santa has been another victim of this bear market. Yesterday’s late rebound and close above fair value, even if it could be also related to the December expirations may have trapped many shorts at the lows, so I will give another chance for this seasonal bullish scenario to happen during the coming sessions.

On my intraday updates I wrote that I have never been a fan of trading the expiration dates, and probably I will pass up myself from trading during today’s session, but surely if I do it, I will try to trade with wider stops and be quick to take my profits.
It seems to me that yesterday’s sells off ended the some short term extremely bullish scenario where all the bad news and early sells offs resulted in a daily come back and now the markets could finally push a bit higher in this struggling rally. However, predicting direction for today’s session is a bit tricky and if the SP traders lower once again and the Dow breaks the 8500 area we could see more selling to close the week.
Conclusion, yesterday’s reversal from resistance levels should be met with another attempt to move higher, if not today then next week, but another strong negative session could be seen before that happens


TODAY’S SESSION

There is resistance just above yesterday’s close at 893.00-894.50 on the SP, 1229.00-1230.00 on the Nasdaq and 486.20-488.30on the Russell. All the time that the indexes do not trade above those levels, there are chances for another test of yesterday’s lows, however, if the markets show a reversal from yesterday’s late sell off, then they should be able to test 899.00-901.00 on the SP, 1238.00-1240.00 on the Nasdaq and 490.80-492.00 on the Russell. Trading above them will finally turn the tide up and probably try to reach the strong resistance areas at 910.00-911.50 on the SP, 1244.00-1246.00 on the Nasdaq and 495.10-496.80 on the Russell.

There is support at 887.00-886.00 on the SP, 1221.00-1218.00 on the Nasdaq and 481.00-479.70 on the Russell. If those can not hold, look for strong support levels at 882.00-881.00 on the SP, 1213.00-1211.50 on the Nasdaq and 476.50-475.70 on the Russell. If those areas hold or the markets get above them after trading lower, look for another run to yesterday’s settlements, however, if those levels fail, then a test of 877.00-875.50 on the SP, 1203.00-1201.00 on the Nasdaq and 471.10-470.00 on the Russell will have to do the job or another strong negative session could be seen. GOOD LUCK.


TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 924.00-925.00 1249.00-1252.00 500.20-501.30
Resistance 3 910.00-911.50 1244.00-1246.00 495.10-496.80
Resistance 2 899.00-901.00 1238.00-1240.00 490.80-492.00
Resistance 1 893.00-894.50 1229.00-1230.00 486.20-488.30
PIVOT 892.50 1218.75 481.60
Support 1 887.00-886.00 1221.00-1218.00 481.00-479.70
Support 2 882.00-881.00 1213.00-1211.50 476.50-475.70
Support 3 877.00-875.50 1203.00-1201.00 471.10-470.00
Support 4 873.50-871.00 1187.00-1186.00 462.00-460.50


S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
972.98 1308.04 530.95
964.02 1297.71 525.35
949.50 1281.00 516.30
934.98 1264.29 507.25
926.02 1253.96 501.65
911.50 1237.25 492.60
896.98 1220.54 483.55
892.50 1215.38 480.75
888.02 1210.21 477.95
873.50 1193.50 468.90
858.98 1176.79 459.85
850.02 1166.46 454.25
835.50 1149.75 445.20
820.98 1133.04 436.15
812.02 1122.71 430.55



DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 902.00 1231.00 500.20
AS DAILY LOW 864.00 1187.00 476.50






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