Stocks fluctuate ahead of the revised plan vote. GE gets $3 billion Buffett investment and plan to sell $12 billion in common stocks. ISM Index contracts at higher pace since 2001. Congress passes the bailout plan.
ECONOMIC DATA8:30 AM Initial Claims10:00 a.m. Factory Orders
YESTERDAY’S MARKETSA volatile session for the U.S. stock indexes. After been trading on the negative territory during the Globex session, the E-mini S&P 500 opened under pressure at 1157.50. The early move pushed the index down to 1150.00 from where it bounced to 1158.00. Unable to break higher, the S&P 500 pushed all the way down to 1144.00. A feeble bounce to 1150.00 was a selling opportunity as traders pushed the index back to its lows. The move lost its momentum and after breaking the low only by a quarter of point, the S&P 500 rallied strong reaching 1156.00 from where it pulled back a couple of points just to continue with strong upside momentum reaching 1172.25 where sellers stepped in strong pushing the S&P 500 all the way down to 1154.00. That low coincided with the announcement of Berkshire investing in GE and in a volatile move the S&P 500 rallied back to 1168.00 where a double top was resolved to the downside driving the index back down to 1157.50 where another wave of buying pushed the S&P 500 to new marginal highs at 1173.00. Once more, the double top got sold and the index traded lower testing 1163.50 from where buying came in during the last hour of trading pushing the index up to 1169.50. Another downward move reached 1161.75 where some short covering was seen driving the index back up to 1168.00 from where it traded quietly in a narrow range until the cash indexes closed and then rallied into the end of the session closing the day above fair value. For the day, the S&P 500 ended lower by 1.50 points at 1167.50, the Nasdaq lost 27.50 points and settled at 1577.00 and the Russell ended lower by 4.60 points at 673.80. The Dow lost 19 points finishing the session at 10831 after a rally of more than 200 points from its daily lows.
MARKET COMMENTARY AND OUTLOOKYesterday I wrote: “Yesterday’s strong rally is what usually happens after a huge drop, buyers look for bargains and shorts cover taking their profits. Many times I have described that most of the huge one day moves do not have any importance on the daily charts until there is a follow through during the next sessions; wide range days, like those that we are experiencing in the current market conditions, have a lot of probabilities to get reversed during the next session as they usually exhaust a move. The markets are on a bearish trend and susceptible to dramatic changes on every piece of news, so trying to figure if yesterday’s rally is only a “dead cat bounce” or the best buying opportunity of the year is still premature for a call. Yesterday’s rally, from the 1133.00 area, that resulted in an inside day on the daily charts will have to show during today’s trading session a continuation pattern to the upside to convince me that a short term multi day rally that reaches at least the 1221.00 area on the S&P 500 during the next few sessions is in the cards, otherwise, the index will continue to trade lower with this bear market typical furious rallies. Another possibility for today’s session is to see the indexes consolidate on a relative narrow range, but it seems that narrow range sessions are not possible under this market conditions. There are a few economic reports during today’s trading session and the rest of the week is also busy, we get the unemployment figures next Friday, so expect volatility to continue unless another strong upside session is seen today or the markets trade on a relative narrow range. The 1160.00 area on the S&P 500 will be pivotal for today’s trading session, the index will start to get weak if it trades too much time below that level, but if it breaks below it and then it goes over it once more, the trend should be upwards.”
Yesterday’s consolidating session that showed an inside day has the ranges getting narrow in front of the next breakout. I wouldn’t be surprised to see more of the same during today’s trading session. The uncertainty about the bailout plan has already been resolved and now, it is the economy and credit conditions that will tell the story. Yesterday’s higher low resulted in a strong upside move, it seems that there is enough support at those levels, and all the time that that low can hold, nothing bad will happen. The same is true on the upside, nothing good will happen all the time that the 1173.00-1175.00 area are not crossed. The S&P 500 and the Dow are forming a clear triangle pattern that once it gets resolved should give us a clear market direction at least for a three to four day move. Volatility continues to be high and markets continue to react with strong moves to any piece of data, but if you are on the right side, there are chances to profit.
Yesterday’s lower opening seem that will get repeated today, at the moment that I am writing my report markets are trading lower, just at yesterday’s pivotal 1155.00 on the S&P 500; if that level can hold for the opening and the index trades back above the 1161.00-1162.00 area, then another test of the highs will be seen. However if the 1161.00-1162.00 area remains intact before the opening and during the session, the downside could get momentum as traders won’t rush to buy one day before the all important release of the monthly unemployment figures.
I still think that the indexes will try to move higher and reach at least levels near the 1193.00 area before another strong round of selling comes into the markets. Therefore I will favor the long side all the time that yesterday’s lows hold, and early test of those lows, a higher low or the S&P 500 coming from below the 1155.00 area will indicate some buying that could result in a nice trade as the indexes try to close the probable opening gap. On the other side of the coin, if the expected rally fails around the 1166.00 level, then lower lows could be seen before the session is over. It will be very bad if the markets cannot move higher during today’s trading session and will indicate more weakness in the coming days.
For today’s trading session, be a buyer near our support areas and try to get short once the rallies lose their momentum.
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
1191.00-1193.00
1618.50-1621.00
697.80-698.50
Resistance 3
1184.50-1185.00
1602.00-1604.50
690.30-691.50
Resistance 2
1177.00-1179.00
1591.00-1593.00
682.50-684.30
Resistance 1
1171.50-1173.00
1583.50-1585.00
676.30-678.00
PIVOT
1161.75
1577.00
672.00
Support 1
1165.00-1163.00
1570.00-1568.00
671.90-670.50
Support 2
1159.00-1157.50
1562.50-1560.00
666.40-665.10
Support 3
1152.00-1151.00
1554.00-1552.00
661.00-660.00
Support 4
1145.00-1143.50
1532.00-1530.00
653.70-652.20
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1220.33
1677.91
709.02
1213.42
1666.59
704.78
1202.25
1648.25
697.90
1191.08
1629.91
691.02
1184.17
1618.59
686.78
1173.00
1600.25
679.90
1161.83
1581.91
673.02
1158.38
1576.25
670.90
1154.92
1570.59
668.78
1143.75
1552.25
661.90
1132.58
1533.91
655.02
1125.67
1522.59
650.78
1114.50
1504.25
643.90
1103.33
1485.91
637.02
1096.42
1474.59
632.78
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
1185.25
1589.50
677.30
AS DAILY LOW
1156.00
1541.00
659.00
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 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.
