Market tumbles on growing economic concern. Productivity OK, weekly job claims better than expected.
ECONOMIC DATA
8:30 AM Average Workweek
8:30 AM Hourly Earnings
8:30 AM Nonfarm Payrolls
8:30 AM Unemployment Rate
10:00 AM Pending Home Sales
10:00 AM Wholesale Inventories
3:00 PM Consumer Credit
YESTERDAY’S MARKETS
U.S equity indexes continue to move lower on a strong negative session. After making its daily highs during the Globex session, the SP opened at 941.50 and rallied reaching the 952.00 level. After making the intraday highs, the session resulted in a downtrend session as every short covering rally failed pushing the indexes to new lows. The SP pushed down to 934.50, bounced back up to 941.50 and moved to a new low at 932.00. Another short covering rally failed at the 940.00 area where sellers stepped in pushing down in the same trading pattern of weak bounces and new lows. The SP along with the other indexes moved down reaching the 900.50 area just two hours before the end of the session. The index rallied al the way back up to 920.00 where a double top resulted in another sell off pushing the index down to new lows. The E-mini SP printed the 897.00 level and then bounced a bit into the close. For the session, the SP lost another 53.50 points closing the session at 904.50, the Nasdaq ended lower 65.25 points at 1306.25 and the Russell settled at 496.70 after losing 19.00 points. The Dow ended the session lower by 443 points at 8695.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “If yesterday’s lows will hold for today’s trading session, the SP will have to start the session with a positive note and completely reverse yesterday’s move, that will place the indexes back on a neutral position, for the uptrend to continue, the recent highs will have to get exceeded, obviously that wont happen before Friday’s data. So for today’s trading session, try to be a buyer all the time that the SP holds the 950.00 area and beware of additional selling pressure below the 947.00 level. On the other side of the coin, the late 965.00 pop will have to get exceeded for the markets to try and make a move before Friday.”
After reaching the 950.00 level and after failing to sustain a rally above that area, the SP moved lower without looking back once it broke below the 947.00 area. This steep sell off that already has resulted in a 61.8 Fibonacci retracement of the last strong bear market rally that started at 824.00 may be already exhausted in the same way that the double top seen during this week exhausted the first rally after the past month fast downtrend. This move could be also a consequence of the expected bad economic job market numbers to get released before Friday’s opening. If this is the case, the indexes should start to rebound not later than Monday and maybe this time reaches the 1040.00 level. However, the risk of another test of the 800.00 level, even if it does not seem to be the most probable scenario, is possible. This major sell off that has a strong downside momentum its an indication that sooner or later, we’ll se another test of the 866.00 area or lower, will it happen before the SP reaches the 1040.00 area, I don’t think so, but if that is the case I will probably will be a buyer at that price.
During the last couple of days I indicated my concern about the bearish divergences between the Nasdaq and Russell and the SP, a low volume rally, with those divergences could not have ended in a different way, a 100.00 SP points sell off in just two sessions. On the long term, the deflation that we have seen in all the economic sectors surely will result in lower stock prices in the following months.
Tomorrow’s session will be dictated by the job market numbers, I can consider that a bad number could be already priced in the markets, but another sell off can happen as traders would not want to stay long for the weekend. So until, unless the markets start to show some bullishness since the beginning of the session, expect any rally to be a selling opportunity. In fact, I will be a nervous long, if I get that side of the markets all the time that the SP keeps trading below yesterday’s intraday highs around 950.00 area in SP and 9100 level on the Dow.
TODAY’S SESSION
Initial resistance is at 910.00-911.50 on the SP, 1246.00-1248.00 on the Nasdaq and 498.80-499.90 on the Russell. If the markets open below those levels, they should be considered extremely weak, and in a big risk of another sharp sell off, however, if those get exceeded during the first hors of the session, a short covering rally cou8ld drives prices higher to 921.00-923.00 on the SP, 1255.00-1256.50 on the Nasdaq and 503.20-504.60 on the Russell. Those are very strong resistance, so if the rally stalls there look to get short with very tight stops, if finally the indexes manage to hold and move higher, then the next levels at 931.25-932.50 on the SP, 1263.00-1265.00 on the Nasdaq and 509.00-510.20 on the Russell may be visited before sellers appear once more.
There is support at yesterday’s lows, 898.50-897.00 on the SP, 1234.00-1232.00 on the Nasdaq and 494.70-493.60 on the Russell. I don’t want to be long if the indexes trade below those areas. If that happens, then the next levels at 891.00-889.50 on the SP, 1223.00-1221.00 on the Nasdaq and 489.80-487.10 on the Russell should be seen. Trading below those levels could trigger much lower prices, 882.00-880.00 on the SP, 1203.00-1201.00 on the Nasdaq and 484.80-484.00 on the Russell. GOOD LUCK.
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 4
938.00-940.00
1279.00-1281.00
519.00-520.00
Resistance 3
931.25-932.50
1263.00-1265.00
509.00-510.20
Resistance 2
921.00-923.00
1255.00-1256.50
503.20-504.60
Resistance 1
910.00-911.50
1246.00-1248.00
498.80-499.90
PIVOT
919.75
1260.00
501.80
Support 1
898.50-897.00
1234.00-1232.00
494.70-493.60
Support 2
891.00-889.50
1223.00-1221.00
489.80-487.10
Support 3
882.00-880.00
1203.00-1201.00
484.80-484.00
Support 4
871.50-870.00
1190.00-1188.00
480.10-479.20
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1114.51
1533.35
638.92
1089.49
1503.15
622.99
1049.00
1454.25
597.20
1008.51
1405.35
571.42
983.49
1375.15
555.49
943.00
1326.25
529.70
902.51
1277.35
503.92
890.00
1262.25
495.95
877.49
1247.15
487.99
837.00
1198.25
462.20
796.51
1149.35
436.42
771.49
1119.15
420.49
731.00
1070.25
394.70
690.51
1021.35
368.92
665.49
991.15
352.99
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
931.25
1273.00
506.00
AS DAILY LOW
870.00
1202.00
484.30
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
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