Trade smart, trade with a plan
Equity indexes continued their downtrend as oil hits $108 a barrel and increasing concerns regarding the financial sector
Economic data
8:30 AM Trade Balance
Yesterday’s markets
The indexes extended their recent losses as they continue to push lower. After a steady opening at 1294.50, the E-mini S&P 500 traded down to 1288.00 and moved higher to 1296.00 just after the release of the wholesale inventories data. Another pullback to the 1287.00 area was met with buying, but the E-mini S&P 500 failed to trade above the highs resulting in the resume of the downtrend. The index reached 1279.00 and bounced back up to 1285.00 where shorts pressed the markets to new intraday lows printing 1278.25 on the E-mini SP. A short covering rally to the 1388.00 area failed to gain upside momentum and the index pushed lower to its daily lows at 1272.25, just at our support areas. The markets reacted well from the lows and during the last hour of trading the E-mini S&P 500 managed to trade at 1380.50 before pulling back into the end of the session and closing at 1275.50. The E-mini Nasdaq added 32 points to its recent losses and settled at 1676.75 while the E-mini Russell broke bellow KEY SUPPORT ending the session at 647.10. The Dow cash lost 153 points closing at 11740.
Market commentary and outlook
Yesterday I wrote: “The fact that all the expectations for an improving in the economy readings have failed, and the increasing risk in the financial sector is still present, will keep the markets under pressure despite wild and huge short covering rallies. I have been looking for a higher low on the daily charts during the first weeks of March and in front of the next Federal Open Market Committee (FOMC) meeting where interest rates will be cut at least by another half point, and in what can be a consolidation from last week falls. It could be possible that Friday’s lows hold for a while, but short-term accumulation has ended and the long-term selling pressure prevails. The Dow cash has already confirmed the long-term downtrend and the S&P close bellow the 1300.00 area has also done it. If this mid- to long-term downtrend fails to print a higher low on the E-mini S&P 500 above the 1255.50, and the Dow cash breaks bellow the 11650, then much lower prices will be seen. At this juncture only two consecutive closes above the 1350.00 on the E-mini S&P 500 will negate this forecast.”
From a technical point of view, the indexes as extremely oversold and ready for a decent bounce, but the continued selling and the recent violation of technical support levels kept pushing for a test of the Jan. 22 lows. The downtrend channels on the 15- and 30-minute period 60/20 moving average have been holding any bounces; and at this moment, the upper trendline is at 1285.00, so breaking above it could signal a possible change of direction or at least a countertrend move. The previous days to the March option and contract expiration usually have a bullish bias, and this combined with the expectation of a rate cut by the Fed on next week meeting, could create the conditions for a multi day rally that if it catch some momentum could drive the E-mini S&P 500 back up to the 1340.00 level and the Dow cash above the 12100. On the other side of the coin, failure to hold yesterday’s 1272.25 low on the E-mini S&P 500 and 11640, January lows on the Dow cash would signal another strong move to the downside which could reach not only the January lows on the E-mini S&P 500 but get to the 1230.00 area or lower. This scenario is what scares me about taking a long position for the coming sessions, and a one day rally, that could be seen today, may be followed by another strong sell off. So, only a strong positive day, with follow through during the next sessions, will convince me to jump and stick to a mid-term long position.
I wouldn’t be surprised to see the market rally during today’s session and try to consolidate the last move down, for this to happen the first signal will be to see the E-mini S&P 500 trading above the 1285.00 area and holding above it on a pullback, but only two consecutive closes above the 1307.00 level will point to higher prices. Another short-term bullish factor is the recent calls from the television networks for a continuation of this downtrend when they already missed the entire move down. I will look carefully how the E-mini S&P 500 reacts to the support levels and go long if after breaking bellow them or holding, the index shows any sign of life, and if the index manage to trade at the 1285.00 and holds on a pullback to the 1280.00’s I will be buying the breaks during the session.
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
1293.00-1295.00
1710.00-1712.00
659.80-660.90
Resistance 2
1287.50-1289.00
1697.00-1700.00
656.00-657.20
Resistance 1
1280.00-1282.50
1687.00-1689.00
651.30-653.50
PIVOT
1282.50
1689.50
651.60
Support 1
1274.50-1272.50
1676.00-1674.00
645.80-645.00
Support 2
1269.00-1268.00
1668.00-1666.00
642.00-640.70
Support 3
1265.00-1264.00
1661.00-1660.00
637.80-636.00
Support 4
1260.00-1258.50
1652.00-1650.00
633.20-632.00
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1343.59
1788.54
702.78
1337.16
1778.21
697.32
1326.75
1761.50
688.50
1316.34
1744.79
679.68
1309.91
1734.46
674.22
1299.50
1717.75
665.40
1289.09
1701.04
656.58
1285.88
1695.88
653.85
1282.66
1690.71
651.12
1272.25
1674.00
642.30
1261.84
1657.29
633.48
1255.41
1646.96
628.02
1245.00
1630.25
619.20
1234.59
1613.54
610.38
1228.16
1603.21
604.92
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1287.00
1697.25
656.30
AS DAILY LOW
1260.50
1653.50
633.20
Support, Pivot and Resistance levels courtesy of Arturo Stern. He authors the E-mini Daily Trading Advisory, which gives technical analysis on all of the major stock index futures contracts. For more of his analysis, go to www.theminitrade.com. Arturo can be reached at arthur@theminitrade.com.
Futures and options trading involve risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. This is neither a solicitation nor an offer to buy or sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of futures results.
