Home prices plunge at a record rate of 12.7%, Consumer Confidence at its lowest point in five years results in another quiet day for the U.S. markets as investors wait for the Fed's decision.
ECONOMIC DATA
8:15 AM ADP Employment
8:30 AM GDP –Adv.
8:30 AM Chain Deflator-Adv.
8:30 AM Employment Cost Index
9:45 AM Chicago PMI
10:30 AM Crude Inventories
2:15 PM FOMC Policy Statements
YESTERDAY’S MARKETS
In another quite session where the dollar got stronger and commodities weakened, the E-mini S&P opened lower at 1395.25 and bounced to close the gap reaching 1398.25. Despite the strength on the E-mini Nasdaq, the E-mini S&P pulled back and tested the 1389.50 support. Another bounce to 1391.00, failed to gain momentum and the index fell to make new lows at 1387.00. After a few attempts to break lower, the E-mini S&P bounced back to 1391.50 and then pulled down to 1389.00 where a slow short covering rally started as the E-mini Nasdaq continued to make new highs. The E-mini Nasdaq reached 1939.50 and the E-mini S&P 1395.75. The markets pulled back with the E-mini S&P testing once more the support levels and after holding, the index rallied to 1397.25 where a triple top invited sellers to step in and the indexes retreated into the close. At the end of the session, the E-mini S&P lost 6.25 points and closed at 1391.25, the E-mini Nasdaq which showed strength during the session added 12.50 settling at 1939.00 and the E-mini Russell lost 6.30 points ending the session at 719.40. The cash Dow lost 40 points finishing at 12,831.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “All the indexes are struggling against strong resistance and yesterday action could result in some selling during today’s session. That will look like a top and a reversal of the last rally, however, the last retracement was very small and all the time that support comes at high levels, gives us a bullish short term picture. So there is not reason to change our view of the markets, I still expect higher prices all the time that the 1380.00 area holds on the E-mini S&P. There is not reason to expect the breakout during today’s session as the market should continue to hold”.
We came in today’s session knowing that the breakout won’t happen until the FOMC Policy Statements get released, and despite the fact that the market was quiet there were a few good moves, with the important hold of support in the E-mini S&P above 1386.00.
There is not a clear indication of what can happen during today’s session. The early part of the session will be influenced by the GDP numbers, the Chicago PMI and the Crude Inventories, if those are not worst than expected we should see some short covering rally in front of the interest rate decision. Once the first two hours of trading finish, the market should enter in a “Mexican Siesta” period where nothing happens and everybody sleeps a couple of hours. Then 15-20 minutes before the announcement, the early move should get reversed as traders start to lighten positions. When the FOMC decision comes out, we should see three different moves during the next 40 minutes, an initial impulsive move that fails, a reversal of that move and the final trend which is the one that we traders try to follow. So only if you have big bucks and wide stops get involve in the first two moves, but take into account that if you are lucky and you go in the right direction, be quick to take your profits. Anyway, stops must be wider than in a regular trading session.
The market is anticipating a 25 basis point reduction in the rates and a change in the Fed’s language where the new priority will be to fight inflation and the end of the cut cycle at least in the near term, there is a lot of stimulus free money that is ready to motivate the consumers to visit Wal-Mart, and the Fed wants to give some time to see its influence on the economy.
Don’t forget that the indexes are trading on overbought conditions and against critical resistance, so a good profit taking move could be seen after the announcement, but I suspect that before the announcement the market will try to be on the positive side all the time that yesterday’s lows hold.
Remember also, that no matter how the markets close today, usually the next trading session, the move get reversed, but if you get caught in the wrong direction, forget about faith and take your loss. I also recommend going into the announcement without a position or by limiting your risk with a tight stop.
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 4
1409.50-1410.00
1963.00-1964.00
735.60-737.10
Resistance 3
1403.00-1404.00
1954.00-1956.00
730.50-731.90
Resistance 2
1397.00-1398.00
1947.00-1949.00
725.60-726.90
Resistance 1
1393.50-1394.50
1941.00-1942.75
721.60-722.80
PIVOT
1392.50
1935.00
720.00
Support 1
1390.00-1389.00
1933.50-1931.00
718.20-717.10
Support 2
1385.75-1384.50
1927.00-1925.50
713.80-712.90
Support 3
1380.50-1379.00
1916.00-1914.00
708.10-707.00
Support 4
1375.00-1373.00
1908.00-1906.00
704.60-703.50
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1418.42
1994.67
745.55
1415.58
1987.83
742.75
1411.00
1976.75
738.20
1406.42
1965.67
733.65
1403.58
1958.83
730.85
1399.00
1947.75
726.30
1394.42
1936.67
721.75
1393.00
1933.25
720.35
1391.58
1929.83
718.95
1387.00
1918.75
714.40
1382.42
1907.67
709.85
1379.58
1900.83
707.05
1375.00
1889.75
702.50
1370.42
1878.67
697.95
1367.58
1871.83
695.15
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1395.00
1957.50
722.90
AS DAILY LOW
1383.00
1928.75
711.00
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
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.
