E-mini trading advisory for Oct. 17

Stocks fluctuate but managed to close higher for the session. Industrial production falls by most in 24 years, Philadelphia Fed factory activity crashes and Inflation flat for September resulted in another wild volatile session. UBS bailout and Citigroup and Merrill posted additional losses.

ECONOMIC DATA

8:30 AM Building Permits

8:30 AM Housing Starts

10:00 AM Michigan Sentiment-preliminary

YESTERDAY’S MARKETS

Stocks fluctuated during the day in another volatile session. After making a low at 880.00 on the SP during the Globex session, the index opened at 915.00 and got sold testing exactly the 900.00 area, from where a quick short covering rally pushed prices up to 927.50. As fast as the index moved up, seller came in and in a strong way pushed the index down to 887.00. Another short covering rally failed to gain momentum above the 900.00 mark and the index made all the way down to 865.25. After holding the lows, the E-mini SP rallied to 898.00, pulled down to 885.00 and rallied back up to 922.00 where another profit taking move pushed prices all the way down to 895.00 the higher low resulted in another short covering move that failed with a double top just below our updated 910.50 area. Once more sellers stepped in and the SP fell to 892.00 where another round of short covering made it to 913.50. Once more the index fell but managed to hold above the 894.00 level. The SP then moved higher and pushed above 910.50 reaching 918.00.Another pullback held and the index rallied strong reaching 937.75 during the last hour of the session. A last pullback to the 925.00 level was bought and the markets rallied to new highs into the end of the session. The e-mini SP added 37.75 points and settled at 941.00; the Nasdaq recovered 94.00 points closing the session at 1323.00 and the Russell ended higher by 35.10 points at 531.80. the Dow advanced 401 points at 8,979.

MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote: “As we expected, once the key support areas at 963.00 on the SP and 9000 on the Dow failed to hold, the collapse was total. The SP has given up 167.00 points since last Tuesday Globex high. Yesterdays late sell off and its close on the daily lows, below fair value, could indicate a temporal capitulation and the exhausting move of the historic rally seen during Monday’s session, however it has placed also the indexes on a position where a crash looks possible. Is that what will finally result in a multi monthly consolidation with intraday ranges returning to normality? Does the Dow Jones get to 7,000 as the SP test the 740.00-720.00 area? Certainly we don’t know. The 23.6% Fibonacci retracement from last week lows to Tuesday’s regular trading session highs crosses at 888.00, if that level won’t hold, then the crash scenario will be only avoided by a higher low, a successful test of the lows, or a marginal new low that gets immediately reversed. The economy is in real problems, and the market is anticipating a painful recession, all the economic data points for a weak economy and higher unemployment. However, if the SP and Dow managed to post higher lows, around 850.00 on the SP, and 8000 on the Dow, and hold, then another wild rally could be seen. Volumes were high yesterday, many fund liquidations but not new participants, no new longs or shorts, professional traders are on the sidelines waiting for better conditions to get involved. We’ll get a bunch of data today, so the markets will continue to show this wildness as they react to each piece of information.”

We have a higher low and a strong recovery rally that may be on its way for further advance, the 963.00 area on the SP and 9200 on the Dow could be the minimum objective for this move if yesterday’s low will hold for a few sessions. Another scenario is to see the markets finally calm a bit and consolidate between yesterday’s lows and highs. Yesterday session could be considered bullish, the initial sell off was orderly, no panic despite the new highs on the volatility index, and buyers were present during the initial move down, it seems that for now, markets look better and late shorts may be trapped on lower prices. Volumes were below average as traders found difficult to deal with the wild swings that we had recently.

If yesterday’s low is a short term low, even struggling while the markets move up, the indexes should be able to hold and reach once more last week highs once they break above the levels that I just mentioned. An early indication will be the continuation of the Nasdaq rally which was impressive.

For today’s trading session, we have a few economic reports, housing data, and later the Michigan sentiment which measures consumer confidence, later on the session, the October option expiration on the close, so expect volatility to continue. I will be a buyer on the pullbacks all the time that the indexes are trading above my pivot point levels.

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

972.50-974.00

1377.00-1380.00

563.20-565.20

Resistance 3

964.25-966.00

1361.50-1363.00

553.20-553.80

Resistance 2

956.00-957.50

1348.00-1350.00

544.10-545.00

Resistance 1

948.50-950.50

1335.00-1337.00

537.40-538.10

PIVOT

918.75

1281.50

517.50

Support 1

933.00-931.00

1310.00-1308.00

526.40-524.20

Support 2

925.00-923.50

1297.50-1295.00

521.50-520.30

Support 3

917.00-915.50

1284.50-1283.00

516.00-514.50

Support 4

894.00-892.00

1246.00-1244.00

500.50-499.20

S&P

NASDAQ

RUSSELL

FIBONACCI

FIBONACCI

FIBONACCI

1086.72

1556.87

631.97

1066.78

1523.88

618.43

1034.50

1470.50

596.50

1002.22

1417.12

574.57

982.28

1384.13

561.03

950.00

1330.75

539.10

917.72

1277.37

517.17

907.75

1260.88

510.40

897.78

1244.38

503.63

865.50

1191.00

481.70

833.22

1137.62

459.77

813.28

1104.63

446.23

781.00

1051.25

424.30

748.72

997.87

402.37

728.78

964.88

388.83

DAILY PROJECTIONS

S&P

NASDAQ

RUSSELL

AS DAILY HIGH

987.00

1396.00

564.20

AS DAILY LOW

903.00

1257.00

506.80

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.

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