Despite the global sell off, U.S. markets recovered from nightly sharp loses as a 17 year low on New Home Sales are interpreted as a sign that the Fed will lower interest rates by the middle of the week.
ECONOMIC DATA
8:30 AM Durable orders
10:00 AM Consumer Confidence
YESTERDAY’S MARKETS
After a rough Globex session where the E-mini S&P printed a low at 1310.50, the indexes came back before the opening to unchanged levels. The E-mini S&Ps were sold at the 1333.00 area and pushed lower during the first half hour of trading, to the 1323.50 level, while the E-mini Nasdaq printed a double bottom near the 1780 area and the E-mini Russell held a triple bottom at 681.50. After the release of the New Home sales data, all the indexes pressed higher. The E-mini S&Ps reached its previous 1333.00-1334.00 area and without sellers on the horizon rallied to our 1342.00-1344.00 resistance area. A 6-point pullback to 1338.00 was bought and the index pushed to new highs to the 1346.00 level. Another pullback to the 1338.00 level without any selling resulted in a run to new highs as the index got to our updated resistance area 1348.25-1350.00 printing its high at 1349.00. Once more the E-mini S&P pulled back six points and rallied to new highs as selling was almost nonexistent. One hour before the close, the index started a profit taking move in the largest pullback seen on the session and tested the 1340.00 where buyers came in strong and pushed up the index to new highs to my updated upside objective at 1358.00. The E-mini Nasdaq reached 1814.75 and the E-mini Russell 704.80 and managed to close above the 701.70 level. The cash Dow closed with a solid 177 point gain for the day.
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MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “They are opinions that the Fed will lower once more the interest rates, so that will be enough to see short traders lighting positions before Wednesday, so, assuming that we have a normal pattern for this end of month and FOMC announcement week, the indexes should move to the upside.”
The indexes came back strongly after a nightly sell off and reversed nicely from early lows sustaining a slowly but consistently advance for most of the session. The pattern calls for a continuation move to the upside or a consolidation that is forming a triangle that will be resolved in a strong move. I have been calling for a 1-4 days countertrend rally, but if the Fed delivers and next Friday unemployment numbers come out better than expected, the indexes could continue with this upside move for another 5-6 days completing a second degree countertrend before resuming its down move. It will be important that the E-mini Nasdaq starts to outperform the E-mini S&P or this divergence could result in a failure of the upside move. Despite the natural tendency to see higher prices before a Fed meeting and a short covering move in front of another rate decision, in the medium term it is a dangerous situation to move higher motivated by rate cuts and not by economy fundamentals. The fact that the indexes are trading against last Friday’s highs is also a concerning issue and even I am partially convince that we have a short term low, further advance is limited. The best that can happen to the market is to start a multi month consolidation period. Yesterday, after the early lows were made, all the indexes trended higher, with the notorious participation of the financial stocks, but the banking, insurers and mortgage institutions problems, have not ended yet. So in a short term period all the multi day rallies should be seen as a shorting opportunity in a move where short players cover just to sell in to the rallies at higher prices.
For today’s session I will maintain a slightly upside bias but I don’t consider that another trend day could be seen, so both sides of the market could offer good trading opportunities once the upside moves and the pullbacks exhaust, “BUT” if the market wants to continue higher, the E-mini Nasdaq will have to join the rally and “higher lows” patterns or the possibility of printing double tops on the E-mini S&P and the E-mini Russell with a weak Nasdaq could result in a downside move. So keep a close eye on the E-mini Nasdaq, the opening price and yesterday’s highs; if the market will continue to move up, those are the conditions that will make it possible.
TODAY’S SESSION
For today’s trading roadmap and intraday updates, please read the authors bio.
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 3
1371.50-1373.00
1848.50-1850.00
719.70-719.50
Resistance 2
1367.00-1368.00
1830.00-1831.50
711.70-713.80
Resistance 1
1361.50-1363.00
1820.75-1822.00
706.70-707.50
PIVOT
1341.00
1795.50
696.80
Support 1
1350.00-1348.50
1800.00-1798.00
701.20-699.50
Support 2
1340.00-1338.75
1785.00-1783.00
695.20-693.50
Support 3
1328.00-1327.00
1761.50-1760.00
686.00-684.90
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1439.52
2002.44
740.14
1429.49
1983.56
735.16
1413.25
1953.00
727.10
1397.02
1922.44
719.04
1386.99
1903.56
714.06
1370.75
1873.00
706.00
1354.52
1842.44
697.94
1349.50
1833.00
695.45
1344.49
1823.56
692.96
1328.25
1793.00
684.90
1312.02
1762.44
676.84
1301.99
1743.56
671.86
1285.75
1713.00
663.80
1269.52
1682.44
655.74
1259.49
1663.56
650.76
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1378.00
1840.00
718.80
AS DAILY LOW
1333.00
1786.00
689.50
Support, Pivot and Resistance levels courtesy of Arturo Stern. He authors the E-mini Daily trading advisory which gives technical analysis on all the major stock index futures contract. For more of his analysis go to www.theminitrade.com Arturo can be reached at arthur@theminitrade.com
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All the material contained here or in any communication is only for information purposes and part of our thoughts and personal conclusions.
