Personal income and spending was higher than expected; Michigan sentiment showing consumer’s confidence at its lowest levels and new record crude oil prices resulted in a mixed session with a bearish bias.
WEEKLY PIVOTS FOR WEEK ENDING July 4, 2008
R3 1426.50R2 1361.75R1 1321.00PP 1296.75S1 1256.00S2 1231.50S3 1192.00
ECONOMIC DATA9:45 a.m. Chicago PMI
WEEKLY RECAPA rough week for the U.S. markets with all the major indexes below key levels. Markets opened the week on an effort to find stability after the previous Friday strong sell off. Monday was a narrow range trading session with financials and bank stocks continue to trade lower. Techs and midcaps finally broke their uptrend, adding loses to the previous session. At the end of the day, the E-mini S&P 500 lost 0.75 points and settled at 1318.25, the E-mini Nasdaq lost 23.50 points closing the day at 1918.00 and the E-mini Russell lost 8.70 points closing at 717.10, its second close below its key support area at 730.00. The Dow cash closed at 11,842, unchanged for the day. Tuesday, the markets tried hard to hold in front of Wednesday’s Federal Open Market Committee (FOMC) policy statement and rate decision, but the economic data continued to show deteriorating conditions, Consumer Confidence fell to a 16-year low and home prices plunged 15.3% on a yearly basis, markets rallied during the early morning but failed to sustain the gains into the close, the E-mini S&P 500 lost 2.75 points and settled at 1315.50, the E-mini Nasdaq gave back another 6.50 points closing at 1911.50 and the E-mini Russell ended lower by 10.50 points at 706.60. The Dow cash posted another losing session ending lower by 35 points at 11807.
Wednesday was a busy day, better than expect Durable Goods orders and New Home Sales not as worst as expected led the markets to early gains that held until the FOMC policy statement was released, changing its previous policy, the Fed signaled the end of the rate cuts, but did not gave investors a clear view of how it is going to fight inflation and future inflation expectations; the different indexes finished the trading session well below their intraday highs with the E-mini S&P 500 added 7.00 points closing the session at 1322.50, the E-mini Nasdaq gained 20.75 closing at 1932.25 and the E-mini Russell ended higher by 7.7 points at 714.30. As many occasions after the Fed decision, markets react the next day,
Thursday’s session, before the opening the GDP for Q1 was released showing a 1% growth, also, initial jobless claims came out at their four week average, but news about Citigroup’s additional write downs and financial institutions downgrades kept the markets under extreme pressure since the beginning of the session, despite many rally attempts, the carnage was general in all the indexes with the E-mini S&P 500 losing 38.00 points and closing the session at 1284.50, the E-mini Nasdaq lost 65.75 points and settled at 1866.50 and the E-mini Russell gave back 17.70 points ending the day at 696.60. The Dow cash lost another 358 points closing at its lowest level in almost two years at 11453.
Friday, markets continued to deteriorate, but the downside momentum lost some of its steam as loses were moderate, record crude oil prices that reached $143 during the session and weakness on the U.S. dollar against better that expected personal income and spending kept the markets trading on a narrow range with a slightly bearish bias. Industrial and financial stocks were beaten equally with GM trading at the lowest level since 1955 and Goldman, Merrill and JP Morgan were downgraded. At the end of the session, the E-mini S&P 500 lost another 4.50 points closing at 1280.00, the E-mini Nasdaq closed almost unchanged at 1865.75 and the E-mini Russell added 2.30 points at 698.90. The Dow cash continued to trade lower and lost another 106 points ending the week at 11346, its lowest level in the last two years. For the week, the main indexes lost between 3 and 4.2%.
FRIDAY’S MARKETSMarkets continued to trade down but some signs of stability were seen as support levels acted well giving the indexes a late rebound. The E-mini S&P 500 opened at 1385.50 and bounced to test its daily resistance at 1288.00 where sellers stepped in and drove process lower testing our first support level at 1280.25. A good short covering rally in all the indexes reached new highs pushing the E-mini S&P 500 up to 1291.00 where the rally failed just at our resistance areas. The E-mini S&P 500 pulled back to 1285.50 and bounced printing a higher low on the intraday charts. Unable to move higher, the index traded lower making a new low at 1279.00 from where a feeble bounce to 1286.50 was aggressively sold pushing the E-mini S&P 500 all the way down to 1273.00. A double bottom managed to hold and the index rallied all the way back up to 1385.50. The last two hours of trading the E-mini S&P 500 traded between the 1277.00 support level and 1285.00 which was rejected a few times during the session. At the end of the day, the E-mini S&P 500 ended lower by 4.50 points at 1280.00, the E-mini Nasdaq at 1865.75 and the E-mini Russell at 698.90. The Dow cash extended its losses, closing the session at 11346.
MARKET COMMENTARY AND OUTLOOKLast Friday I wrote: “The divergences between the indexes continue to be present as an alert for those who think that the markets are out of troubles. The downtrend on the E-mini S&P 500 and Dow, is obvious, but the E-mini Nasdaq and Russell continue to hold without breaking its consolidating pattern. The indexes have already broke below their key support levels after last week’s failure to get back above the 1371.00 area on the E-mini S&P 500 and there is not reason to assume that lower prices won’t be seen during the coming sessions. However the oversold conditions in the markets, in particular on the Dow cash, which already fell almost 1300 points from its last highs and the June option expiration that is already behind us, could result in a 1-3 countertrend rally in all the indexes. That first degree countertrend should take the E-mini S&P 500 to the 1331.00-1333.00 area and maybe to the 1342.00-1346.00, but moving up there, could offer a great shorting opportunity as the index should test at least the 1296.00 level during the following days. If that will be the low from where a sustainable rally starts, will have to happen with a rebound on the financial and bank sectors, as all the time that those are on a free fall, nothing good is going to happen in the markets. Assuming that I am correct and the markets bounce today and tomorrow, before the next Wednesday’s FOMC meeting and rate decision, the Dow cash should be able to get near the 12050 area, and from there the expected test of the January and March lows should be seen before the indexes start a multi week countertrend rally in this bear market.
Well, the E-mini S&P 500 was able to get near the 1342.00 where I called for a great shorting opportunity and a move to the downside for a test of the yearly lows, however, the downtrend has been stronger than I expected and Friday’s lows could have reached a temporary low. The size and extension of the last down move have place the indexes near levels where a bounce could be seen, if that bounce will be short lived or the indexes will start a consolidation period that finally will result in a mid term recovery from the recent loses, is something that only time will tell us, but the odds favor some kind of temporary bounce. Friday’s low on the E-mini S&P 500 has reached support levels and they should hold despite an intraday break below them and rally. However, if that rally will last more than one day and then get resolved with another steep fall, or the rally will be a 2-4 days move into the end of this holiday week and then later next week take out the recent lows it depends of what happens during today’s session.
For today’s trading session I will expect some kind of rebound, but I am not so sure that it will be longer that one day and then move once more lower to make new lows in capitulation move that bring the markets to new lows below the March low. Only a rally that holds the recent lows for more than 14 days will indicate that a mid term low is in place. During today’s trading session I will go long on a test of Friday’s lows or I will try to play the bullish side of the markets all the time that the indexes are trading above my pivot point levels.
TODAY’S SESSIONFor 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
1309.25-1310.50
1900.00-1901.75
715.70-716.80
Resistance 3
1298.00-1300.25
1984.00-1986.00
708.40-710.10
Resistance 2
1290.00-1291.25
1877.00-1879.00
703.80-705.00
Resistance 1
1283.50-1285.25
1870.00-1872.00
700.90-702.00
PIVOT
1281.50
1860.00
697.30
Support 1
1276.50-1275.00
1861.00-1858.00
696.90-695.80
Support 2
1271.50-1269.75
1854.00-1851.50
692.50-691.30
Support 3
1263.50-1262.00
1842.75-1841.00
687.70-686.40
Support 4
1258.25-1256.50
1833.00-1832.00
682.30-681.00
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1322.49
1945.30
719.96
1318.01
1935.45
717.34
1310.75
1919.50
713.10
1303.49
1903.55
708.86
1299.01
1893.70
706.24
1291.75
1877.75
702.00
1284.49
1861.80
697.76
1282.25
1856.88
696.45
1280.01
1851.95
695.14
1272.75
1836.00
690.90
1265.49
1820.05
686.66
1261.01
1810.20
684.04
1253.75
1794.25
679.80
1246.49
1778.30
675.56
1242.01
1768.45
672.94
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1285.75
1871.75
706.00
AS DAILY LOW
1266.75
1830.00
694.90
Support, pivot and resistance levels courtesy of Arturo Stern, who 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 HYPERLINK "http://www.theminitrade.com" 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.
