DAILY TRADING ADVISORY
Fannie Mae and Freddie Mac possible recapitalization by the FED (read: bailout) and Lehman Brothers Q3 worries result in big losses as bonds move higher.
ECONOMIC DATA
8:30 AM Building Permits8:30 AM Housing Starts8:30 AM CPI8:30 AM Core CPI
YESTERDAY’S MARKETSU.S. equity indexes end lower on new financial concerns. After trading higher during the Globex session, the indexes opened above Friday’s settlements but under selling pressure. The E-mini S&P started the session at 1302.75 and guided by the early selling on the Nasdaq pushed lower. The S&P reached 1292.00 and bounced up to 1294.00 where new selling came into the markets making new intraday lows at 1290.50 where the early selling lost its momentum. As shorts run to cover the S&P reached 1296.00 and traded sideways for the next hour. Unable to move higher, the indexes finally broke to the downside with the E-mini S&P reaching 1286.50. A feeble bounce to 1288.50 was meeting with more selling pressure pushing the index down to a new intraday low at 1282.00, just above our last support levels. After holding the lows, the index bounced a couple of points and than moved lower making a new marginal low. A second effort to move higher leaded by the Nasdaq failed once more at the 1284.50 area from where the S&P pushed to new intraday lows at 1278.25. Unable to mount any type of rally, the indexes kept falling with the S&P reaching 1274.00 from where it bounced nicely into the close. For the day the S&P lost 17.75 points and settled at 1282.00, the Nasdaq ended lower by 22.00 points at 1943.50 and the Russell finished the session at 743.80, minus10.90 points. The Dow gets hammered, losing 180 points closing the day at 11479.
MARKET COMMENTARY AND OUTLOOKYesterday I wrote: "We came into Friday’s session looking for the last two day consolidation to continue despite the August option expiration where selling the rallies and buying the pullbacks was the way to go, and we were correct, but additionally we saw a narrow range trading session that will have to get a breakout if not today, during tomorrow session. The way S&P has been posting higher lows with support coming in at very high levels, call for another leg in this rally that should propel prices up at least to the 1320.00 level. However if the index fails to move higher and last week 1310.25 area is not exceeded, then probably this move is already exhausted. Take into account that this struggling upside move usually gets resolved to the upside but if we don’t see a strong breakout during the next 48 hours, then the lower trend line will get broken with a wide range day that once if breaks below 1274.00 last week low could get accelerated to the downside. The Dow keeps consolidating and as the S&P’s looks ready to break higher but the upward channel could also get re4solved to the downside, in this index keep a close eye on last Thursday highs around 11730 as a signal for an upside breakout that could lead this index the 12000-12300 areas, only trading below 11435 will indicate that the rally is over.”
Yesterday’s move was the direct consequence of the failure to break higher that we were taking about, and, the S&P reached EXACTLY our 1274.00 level before bouncing back, also, the Dow, made a low at 11434, just one point below our 11435 downside objective for an expected correction. So our levels held, meanwhile, the selling pressure. The S&P and Dow are testing the lower boundary that if it gets broken it could trigger a huge downside break, its confirmation, will be breaking below yesterday’s lows. The Nasdaq keeps holding the recent range, but it seems that can not move higher, and, at some moment will have to follow the other two indexes and, if the downside break happens, move much lower. So despite that the indexes were able to come back to a neutral position during yesterday’s last hour of the session, the markets remain extremely vulnerable and another down day will indicate that the last countertrend rally is complete, if that is the case, chances to visit the July lows will be the most probable scenario.
For today, there is a lot of important data before the market opens, housing and inflation reports, that will impact the opening and the trading session. I can call for a day of sideways trading as yesterday’s sell off consolidates, but breaking below yesterday’s lows and not bouncing almost immediately will open the door for another negative session. I won’t be a buyer until the S&P clears my 1287.25 pivot point.
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
1306.75-1308.50
1977.00-1978.75
760.90-761.70
Resistance 3
1299.75-1300.75
1970.00-1971.25
755.40-756.50
Resistance 2
1294.50-1296.00
1955.00-1957.50
749.50-750.70
Resistance 1
1288.50-1290.50
1948.50-1950.00
745.60-747.80
PIVOT
1287.25
1947.75
746.00
Support 1
1279.00-1278.00
1938.50-1936.50
741.90-740.30
Support 2
1276.00-1274.50
1932.00-1930.25
737.70-736.20
Support 3
1270.00-1268.50
1919.50-1918.00
734.00-732.80
Support 4
1264.50-1263.00
1913.50-1912.00
729.80-727.90
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1357.78
2060.54
791.84
1350.22
2048.21
786.86
1338.00
2028.25
778.80
1325.78
2008.29
770.74
1318.22
1995.96
765.76
1306.00
1976.00
757.70
1293.78
1956.04
749.64
1290.00
1949.88
747.15
1286.22
1943.71
744.66
1274.00
1923.75
736.60
1261.78
1903.79
728.54
1254.22
1891.46
723.56
1242.00
1871.50
715.50
1229.78
1851.54
707.44
1222.22
1839.21
702.46
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1294.00
1959.75
750.70
AS DAILY LOW
1262.00
1907.50
729.80
Support, pivot and resistance levels courtesy of Arturo Stern, who authors the daily “E-mini 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.
