U.S. Markets ended a losing week as the Fed indicates higher inflation and unemployment and the end of the rate cut campaign. Existing Home Sales declined another 1% for April.
WEEKLY PIVOTS FOR WEEK ENDING May, 30, 2008
R3 1464.00
R2 1431.00
R1 1418.75
PP 1395.75
S1 1360.00
S2 1336.00
S3 1282.25
ECONOMIC DATA
10:00 AM Consumer Confidence
10:00 AM New Home Sales
WEEKLY RECAP
Markets lost ground during the week as Crude Oil prices hit new highs and the FED hints the end of the rate cuts. Monday’s Leading Indicators data which came out as expected and record crude oil prices, resulted in a mixed session for the U.S. stock indexes, after trading at the highest levels since the March lows. The E-mini S&P reached our upside objective for this last leg up trading as high as 1441.00. Later on the day, the indexes gave back their gains, the E-mini S&P settled at 1429.75, up 4.00 points, the E-mini Nasdaq closed at 2025.75 with a loss of 9.75 points and the E-mini Russell finished unchanged for the day at 740.90. The cash Dow added 41 points closing at 13028. Tuesday’s, markets suffer substantial losses as a result of a higher than expected PPI increment, an AIG announcement that it will have to raise $20 billion in new capital and Home Depot earnings plunge. New weakness in the dollar against the major currencies contributed to keep the markets under pressure for the most of the session. For the day, the E-mini S&P ended lower at 1417.50 losing 12.25 points, the E-mini Nasdaq closed at 2016.25 with a loss of 16.25 points and the E-mini Russell which continues to show support at high levels gave up 2.60 points and settled at 738.30. The Dow closed sharply lower at 12,828 losing 199 points for the session. Wednesday’s action was ruled by a blow up on Crude oil prices and the released of the FOMC last meeting minutes, where the Fed suggested the end of the rate cuts, lowered the economic growth expectations, raised the inflation projections and forecasted higher unemployment. Once more the equity indexes closed down for the day, the E-mini Nasdaq closed with big loses at 1964.50 minus 45.00 points and the E-mini Russell which continues to show strength lost 8.90 points and settled at 729.40. The Dow closed sharply lower losing another 227 points ending the session at 12,601. Thursday, Initial Claims came out as expected, and the session was a quite one, the indexes traded on a narrow range consolidating the previous days big down moves. The E-mini S&P failed to close back up above the 1400.00 area and the Dow showed only a modest rebound. For the day, the E-mini S&P settled almost unchanged at 1293.25 up .25 points, the E-mini Nasdaq at 1966.50 plus 2.00 points and the E-mini Russell added 2.00 points finishing the session at 732.00. The Dow closed up 24 points ending the session at 12,625. Friday’s session the weakness continued in particular for the E-mini S&P and Dow indexes. The Existing Home Sales came out lower than the previous month showing that the housing crisis is far from relief. The long weekend, kept traders on the sidelines as the markets ended lower despite a relative strength on the E-mini Nasdaq, E-mini S&P finished the session at 1373.50, the E-mini Nasdaq lost 8.25 points closing at 1958.25 and the E-mini Russell closed lower at 723.10, down 8.90 points for the day. The Dow lost another 145 points and settled at 12,479 with a loss of six points. For the week all the indexes ended sharply losing between 3 and 4%.
FRIDAY’S MARKETS
Markets were under pressure during all the session. The E-mini S&P opened below our first support area at 1389.50. The indexes spent a few minutes trying to break above the 1390.00-1391.00 resistance area, after failing to do so sellers stepped in and push the index lower to 1386.50. A feeble bounce was met with selling pressure and the E-mini S&P, despite the strength on the E-mini Nasdaq, started a down trend day. The E-mini S&P tested the 1381.50 support level and bounced back quickly to 1385.75 just to fall to new lows at 1377.50. Another failed rebound to 1380.50 resulted in another new low, in the same repetitive pattern of new lows, with small short covering rallies. Another new low at 1374.00 was tested and traded a few times; after two more bounces to the 1381.00 area the index finally made new lows into the close printing 1372.75 on the daily chart. For the day, the E-mini S&P lost 19.75 points finishing the session at 1373.50, the E-mini Nasdaq lost 8.25 points closing at 1958.25 and the E-mini Russell closed lower at 723.10, down 8.90 points for the day. The Dow lost another 145 points and settled at 12479 with a loss of six points. For the week all the indexes ended sharply lower.
MARKET COMMENTARY AND OUTLOOK
Last week I wrote: “The indexes have made a nice run to the highs and there is not a reason to believe that a serious sell off is near. The markets will have to show two consecutive days of loses to indicate that a short term top has been reached, and even with a pullback, the E-mini S&P should hold all the week near or above my first weekly support level at 1401.00. The volumes continue to be low, but there is not selling coming into the markets, so a consolidation of the last move up could be seen during the week. The E-mini Nasdaq and Russell are on a very strong position, and only a complete failure at these levels will negate the scenario that the bottoms were seen during last March lows. I will expect the indexes to pullback mildly, or to continue, on the E-mini S&P with this weak rally until a spike confirms the exhausting of this last leg up and starts a multi week consolidation before moving up to the next levels. If the E-mini S&P rallied during the week, it should be able to reach my 1441.50 area where some profit taking could start.” Last Friday I wrote: “Yesterday’s consolidation, after a two days sell off is a typical behavior of the markets but when the consolidation is at the lows, normally indicates lower prices to come, if that happens the 1384.00-1380.00 area on the E-mini SP could offer a short term good buying opportunity with tight stops, as if that index break lower, then 1370.00 will be seen before buyers take a chance.”
Last week sell off has been quick and has reversed the trend. The way the indexes gave back more than 60 points on the E-mini S&P, and almost 700 points from the intraday highs, on the Dow, is a clear signal of the strength of this reversal on the trend. When we look at the E-mini S&P 60 minutes charts, we can see that Friday’s down move was the third wave of selling from the 1441.00 top, and despite the fact that the index could start today’s session with weakness, a rebound is just around the corner. Last week I mentioned that closing below the 1384.00 area indicates lower prices, and at this juncture the bounces should be seen as selling opportunities for those holding a position, it will take for the E-mini S&P to close back up above the 1400.00 area to negate this pattern. But as markets don’t go up or down without correcting, a one to three countertrend move could be expected starting today. On the Dow, nothing good happens all the time that the index is trading below the 12,800 level.
Going back to the E-mini S&P, the index is testing the 38.2 retracement from the March lows to the May highs, seen on the daily chart, and that should be enough for the countertrend bounce that I am expecting in this new down trend. We have to take in consideration that the medium term pattern can also be resolved in a distribution that last for the next few weeks, but the probabilities indicates much lower prices. The only thing on the daily charts that will indicate a consolidation of the index during the next sessions, and a move up to test the recent highs or post a lower high on the daily charts, will be that the rebound that I am expecting result in a strong move that exceed the 1400.00 area during the next three days.
For today’s session we can expect a bounce, I will look at my first support area as a buying opportunity as the index should be able to hold between last Friday’s 1372.75 low and my 1371.50-1369.50 first support levels. If that happens, trading back up to the 1384.25-1385.75 area during today’s session could be seen. I want to follow the E-mini Nasdaq as an indication of markets direction as Friday’s divergence between the E-mini S&P and this index shows a rebalancing of traders position, that means, if the E-mini Nasdaq will outperform the E-mini S&P I will be buying the pullbacks. This mild bullishness is not my sentiment for what I expect for the markets during the coming days or weeks, it is only a short term correction that I am expecting before the markets move lower.
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
1395.00-1396.50
1988.00-1989.50
739.40-740.50
Resistance 3
1389.00-1390.00
1978.00-1980.00
735.80-736.50
Resistance 2
1384.25-1385.75
1969.75-1971.00
730.00-731.20
Resistance 1
1377.50-1379.50
1962.50-1964.50
725.80-727.10
PIVOT
1380.50
1957.75
724.70
Support 1
1371.50-1369.50
1954.00-1952.00
720.80-719.10
Support 2
1365.75-1364.50
1946.00-1945.00
716.60-715.00
Support 3
1361.00-1359.50
1936.50-1934.50
711.40-710.00
Support 4
1354.00-1352.50
1928.00-1926.00
706.40-705.50
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1431.41
2007.93
756.68
1426.10
2002.32
753.22
1417.50
1993.25
747.60
1408.91
1984.18
741.98
1403.60
1978.57
738.52
1395.00
1969.50
732.90
1386.41
1960.43
727.28
1383.75
1957.63
725.55
1381.10
1954.82
723.82
1372.50
1945.75
718.20
1363.91
1936.68
712.58
1358.60
1931.07
709.12
1350.00
1922.00
703.50
1341.41
1912.93
697.88
1336.10
1907.32
694.42
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1384.25
1964.00
728.00
AS DAILY LOW
1362.00
1940.25
713.30
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.
