ADP Employment down 250,000, Productivity higher than expected, ISM Index Services at its lowest level since 1997. Fed says economy weakened in all the regions
ECONOMIC DATA8:30 a.m. Initial Claims10:00 a.m. Factory Orders
YESTERDAY’S MARKETA sharp decline during the Globex session resulted in a negative opening for the U.S equity indexes. The E-mini S&P 500 started the session at 828.50 and tested the 826.00 Globex lows from where it bounced back above the 832.00 key support areas reaching 836.25, just below our 837.50 pivot point. After failing to trade higher, the index sold off to 826.25 just before the ISM Services Index reported a worst than expected decline. After holding the early lows, the S&P rallied to the 838.00 area. Once it broke above it, the rally got some momentum and pushed all the way up to 847.75. After a few attempts to move higher, the rally finally continued to 858.00, pulled back to 853.00 and pushed up to 864.75 from where it pulled back to 855.25 just to bounce once more posting a double top. As the upside lost its momentum the S&P pulled all the way back down to 851.00 from where it bounced a few points holding for a few minutes but finally pushed lower reaching 835.50 just 15 minutes before the release of the Fed’s Beige Book. Once the report was released, the S&P held pushing up to 845.00 and then to 859.00; from there it pulled back to 853.00 just to run once more to the last highs. As the index failed to break to higher prices, a sharp and fast sell off tested 846.50 where buyers came in once more driving the index up to 858.00 and with continued volatility pulled back to 848.50 and with a few swings rallied all the way to 873.75 pulling back into the end of the session. For the day, the S&P ended higher by 19.50 points at 868.50, the Nasdaq finished the session at 11156.00 gaining 23.00 points and the Russell settled at 453.10, up 12.20 points. The Dow closed the session at 8591 with a 172 points advance.
MARKET COMMENTARY AND OUTLOOKYesterday I wrote: “Markets have formed a clear triangle pattern and probably will continue to build them for a few more days, but once they get broken a huge move could be in the cards, that pattern is defined at the 880.00 upper boundary and 821.50 on the lower angle, and they coincide with the 8820 and 8180 levels on the Dow. Yesterday’s 818.00 low on the S&P will have to hold any selling pressure, I assume that if that level gets violated, markets could be ready for a test of the yearly lows and even lower, however, yesterday’s action showed strong support near the Monday’s lows. On the other side of the coin, if we take in consideration the extension of Monday’s huge sell off, it seems that yesterday’s rally, and a possible continuation of it during the first half of today’s trading session, may be a great selling opportunity, on the early going, all the time that yesterday’s highs remain intact, and for the rest of the session and the week, all the time that the 880.00 and 8800 levels for the S&P and Dow respectively hold. The other indication for the downtrend to resume will be the lack of follow through to yesterday’s late rally. In conclusion, yesterday’s consolidating session which managed to post a double bottom on the S&P has not given yet evidence of that market trading down once more, but I will be very cautions once that index starts to trade below 832.00, and obviously I won’t run to pick a bottom if yesterday’s 818.00 intraday low gets broken. For today’s trading session, and early pullback that holds 833.00-831.00 on the S&P could result in a 20 points rally, so if the market gets there and hold, be ready to be a buyer with ultra tight stops; remember that later on the session we’ll get the Fed’s Beige book, that could result in a huge reversal of any trading pattern, tight your belts on, as volatility should continue.”
Yesterday’s lower opening and mid-day sell off, held perfectly above our 833.00-831.00 levels resulting in huge intraday rallies as the markets try to come back after Monday’s huge sell off. This triangle pattern continues to be valid and probably won’t get broken until tomorrow after the unemployment figures get released. There is not too much to add to yesterday’s report, however, yesterday was the second session where a lower opening and huge volatile swings markets post a positive close. I am afraid that yesterday’s rally could have already exhausted the countertrend rally, and today, another weak opening won’t be able to find strong support. Why to get long in front of tomorrows expected bad economic reports? Maybe trapped shorts and the same behavior that we have seen the last two sessions. Bad economic data and markets holding trying to push higher. Yesterday’s late highs can be the top of this move as a countertrend move that shows weakness after two sessions have the tendency to get reversed, so don’t get so optimistic about further advance until yesterday’s highs get exceeded. Selling the rallies all the time that those highs remain intact is the best way to go.
Keep in mind that the markets are sending mixed signals, low volumes, a seasonal slightly bullish bias and huge selling pressure where every advance get sold. So if the market can hold until Friday’s close, we could see higher prices, but if today’s trading session result in another wild sell off that does not get reversed tomorrows morning, then this rally attempt will be over.
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
893.00-894.50
1184.00-1186.00
468.90-470.50
Resistance 3
884.00-885.00
1175.50-1177.00
464.20-465.90
Resistance 2
877.25-878.50
1169.00-1170.50
459.10-460.30
Resistance 1
872.50-873.50
1162.50-1164.00
454.70-455.60
PIVOT
856.00
1139.50
446.50
Support 1
864.00-863.00
1148.00-1147.00
450.50-449.80
Support 2
858.00-856.50
1141.00-1139.00
445.20-444.60
Support 3
847.00-845.50
1133.00-1131.00
441.00-439.90
Support 4
841.00-839.50
1118.00-1116.00
435.40-433.70
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
951.01
1280.57
504.20
939.74
1263.93
497.40
921.50
1237.00
486.40
903.26
1210.07
475.40
891.99
1193.43
468.60
873.75
1166.50
457.60
855.51
1139.57
446.60
849.88
1131.25
443.20
844.24
1122.93
439.80
826.00
1096.00
428.80
807.76
1069.07
417.80
796.49
1052.43
411.00
778.25
1025.50
400.00
760.01
998.57
389.00
748.74
981.93
382.20
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
895.00
1196.50
469.80
AS DAILY LOW
847.25
1126.00
441.00
Support, pivot and resistance levels courtesy of Arturo Stern. He 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.
