Daily Trading Advisory

arturo1

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DAILY TRADING ADVISORY 03-October-2008


U.S. stock markets suffer another major decline. Initial claims higher then expected. Factory Orders down by 4%.

ECONOMIC DATA

8:30 AM Average Workweek
8:30 AM Hourly Earnings
8:30 AM Nonfarm Payrolls
8:30 AM Unemployment rate
10:00 AM ISM Services


YESTERDAY’S MARKETS

U.S. markets posted another sharply decline as uncertainty and bad economic data kept a negative sentiment. After trading higher during the Globex session, the E-mini SP opened at 1154.00 where the sell off started. The index fell straight to the 1136.00 area bounced back to 1142.00 and pushed down to 1125.50 where a strong wave of short covering drove prices back up to 1139.00. Unable to break higher the index started a steady decline with minor volatile short covering rallies on the way. A short lived double bottom at the 1126.00 area triggered another bounce to the 1136.00 level where sellers stepped back in pushing the index down to 1119.50. Another bounce failed at the previous 1126.00 low and the SPP sold off another 10 points reaching the 1115.25 before bouncing into the end of the session, closing above fair value. For the day, the SP lost 44.00 points and settled at 1124.50, the E-mini Nasdaq lost 68.25 points finishing the session at 15110.50 and the Russell ended lower by 33.90 points at 640.70. The Dow suffered another sharply decline losing 348.00 points closing the day at 10482.




MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote: “Yesterday’s consolidating session that showed an inside day has the ranges getting narrow in front of the next breakout. I wouldn’t be surprised to see more of the same during today’s trading session. The uncertainty about the bailout plan has already been resolved and now, it is the economy and credit conditions that will tell the story. Yesterday’s higher low resulted in a strong upside move, it seems that there is enough support at those levels, and all the time that that low can hold, nothing bad will happen. The SP and the Dow are forming a clear triangle pattern that once it gets resolved should give us a clear market direction at least for a 3-4 day move. Yesterday’s lower opening seem that will get repeated today, at the moment that I am writing my report markets are trading lower, just at yesterday’s pivotal 1155.00 on the SP; if that level can hold for the opening and the index trades back above the 1161.00-1162.00 area, then another test of the highs will be seen. However if the 1161.00-1162.00 area remains intact before the opening and during the session, the downside could get momentum as traders won’t rush to buy one day before the all important release of the monthly unemployment figures.”

We came into the session looking for some consolidation until the triangle formations on the Dow and SP would get broken and we thought it would be possible to hold even with a slightly bullish bias, wrong. Yesterday’s decline has posted double and triple bottom on various indexes that does not mean the markets are ready for a rebound. The unemployment data to be released today before the opening, the ISM Services which could show an important decline and the uncertainty about the bailout plan and the state of the economy will dominate today’s trading session. An early decline that holds yesterday’s lows on the SP and the 11400 area on the Dow could result in a good bounce. The approval, if it happens of the bailout plan could also result in a weak rally or even in another test of the 1200 area on the SP, however, it seems that once the initial euphoria, if the bill is approved, finish, the bear trend will likely complete its last down leg. I have been pointing for the 1093.00 as a downside objective for this move, but it could be that the price will be much lower, between 1040-1020 if it happens. It could be that in term of prices this projected levels seem scary, but in term of time it can happen during the next two weeks and then a mid-term rally could last for the next 60 days resulting in a multi-month consolidating pattern.


For today’s trading session, it will be a big surprise if the unemployment data does not disappoint, the same is true for the ISM Services number, so the reaction should be downwards, but if yesterday’s lows can hold during the first hour and a half of the session. The way will be open for another run to the 1138.00 level. If yesterday’s lows can not hold, the markets will keep their negative tone and another 30 points drop on the SP that could reach the 1093.00 could be seen.

Under the current volatile conditions, day trading the markets with relatively small stop loss limits, has become impossible, so unless you have big pockets and good nerves the best advice is to stay on the sidelines waiting for a more normal trading.



TODAY’S SESSION
There is initial resistance at 1133.00-1134.50 on the SP, 1528.50-1530.00 on the Nasdaq and 644.80-645.70 on the Russell. These levels and the next resistance areas at 1139.00-1141.00 on the SP, 1538.00-1540.00 on the Nasdaq and 649.80-651.00 on the Russell are huge obstacles for any rally attempt, but if the markets manage to break above them a good short covering move, in particular if we get any surprise could be seen driving prices up to 1149.25-1150.00 on the SP, 1651.00-1653.50 on the Nasdaq and 658.70-660.20 on the Russell.
.
Initial support is just above yesterday’s lows at 1119.00-1118.00 on the SP, 1501.50-1499.00 on the Nasdaq and 636.60-635.20 on the Russell. If those are tested early in the morning, and hold, a good rally could be underway, But if shorts press stronger, then expect a test of the 1113.00-1111.50 areas on the SP, and 1492.00-1490.00 and 630.10-628.50 for the Nasdaq and Russell respectively. Those are the last important short term support levels if the markets will keep the head above the waters. If those can not hold, expect the melt down to continue driving prices lower to 1107.00-1005.25 on the SP, 1484.00-1481.75 on the Nasdaq and 623.80-621.70 on the Russell. Failure of the SP to hold there will point for a test of the 1093.00 level before the session is over. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P NASDAQ RUSSELL
Resistance 4 1156.00-1158.50 1562.00-1564.00 665.00-666.50
Resistance 3 1149.25-1150.00 1651.00-1653.50 658.70-660.20
Resistance 2 1139.00-1141.00 1538.00-1540.00 649.80-651.00
Resistance 1 1133.00-1134.50 1528.50-1530.00 644.80-645.70
PIVOT 1138.00 1532.00 650.00
Support 1 1119.00-1118.00 1501.50-1499.00 636.60-635.20
Support 2 1113.00-1111.50 1492.00-1490.00 630.10-628.50
Support 3 1007.00-1005.25 1484.00-1481.75 623.80-621.70
Support 4 1094.00-1092.00 1473.00-1471.50 617.70-615.70


S&P NASDAQ RUSSELL
FIBONACCI FIBONACCI FIBONACCI
1269.06 1744.46 748.22
1255.19 1722.04 737.78
1232.75 1685.75 720.90
1210.31 1649.46 704.02
1196.44 1627.04 693.58
1174.00 1590.75 676.70
1151.56 1554.46 659.82
1144.63 1543.25 654.60
1137.69 1532.04 649.38
1115.25 1495.75 632.50
1092.81 1459.46 615.62
1078.94 1437.04 605.18
1056.50 1400.75 588.30
1034.06 1364.46 571.42
1020.19 1342.04 560.98



DAILY PROJECTIONS S&P NASDAQ RUSSELL
AS DAILY HIGH 1149.25 1550.00 658.70
AS DAILY LOW 1090.50 1455.00 614.50​

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