Rollover day is on Thursday Dec. 11, 2008
Markets extend the rally for another session as President Elected Obama promise to implement the largest infrastructure spending package since the 1950's. Congress and the White House worked to resolve their last disputes over terms of a $15 billion bailout for U.S. auto makers.
ECONOMIC DATA
10:00 AM Pending Home Sales
YESTERDAY'S MARKET
It was another strong session for U.S. equity markets. The SP started the session with a big gap at 899.00 from where it pulled back to 895.50. As support held, the E-mini SP rallied all the way up to 907.50 where some selling came into the markets pushing the index down to 895.75. Unable to break lower and with short traders running for cover, the SP got over its previous high and reached 911.50. A 1-2-3 top resulted in another visit to the 896.00 low from where the index in an erratic move traded on a sideways pattern that finally pushed to new intraday lows at 893.50. Once more buyers stepped in and the SP rallied all the way back up to 908.75, pulled back to 904.00 and continued to move up reaching 919.25, unable to hold at the highs, the SP sold off strongly into the close testing 901.75, jumped back up 912.75 and pulled back into the close. For the day, the SP ended higher by 32.25 settling at 904.75; the Nasdaq which showed strength during all the session closed up by 34.00 points at 1212.00 and the Russell ended the day at 480.50 with a big gain of 23.70 points. The Dow which managed to trade above the 9000 mark closed at 8934, up 298 points.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “I have been calling for a strong December, we have been watching the triangle formation on the SP and Dow's charts, and if this bear market rally, that started last week on Friday, will continue, the SP should be able to test the 944.00 area during this week. The key for this to happen, after the market trades above the 900.00 level, will be two consecutive closes above the 915.00 area, if that happens, then this rally could be able to extend to the 960.00-970.00 band. At those levels, sellers may step in strongly and probably another strong down move will start. I have also been writing about the impact of lower crude oil prices as a deflationary condition for the economy and the stock markets, so, for this possible countertrend move to happen and get some upside legs, commodities will have to join the up move despite the shrinking economy and the recessionary conditions already present in all sectors. So, for today's trading session, be a buyer on the first decent pullback and look to play the long side of the markets all the time that Friday's settlement holds, don't be afraid to enter long once it trades back above it, not only that, an early sell off that test my 861.50 area on the SP could be a huge buying opportunity.”
Yesterday's action showed the follow through move and a continuation rally that we were expecting, also, the commodities finally managed to bounce. The early strength seen on the markets was the first outbreak of the triangle formation that we have been following, and despite the fact that gives some confidence that a short term low has been posted, yesterday's action saw a sideways patter, not only that, the late sell off shows that some profit taking should be seen very soon. If the futures settlement would have been at the highs, I would think that the rally from Friday's 817.00 lows to yesterday's levels could be exhausted and place the rally on a risk position, however, the fact that the indexes settled in the middle of their intraday range, makes me think that we should see another attempt to break higher, that at this time I consider will be a successful one as the SP may be able to get to my 940.00-960.00 objective while the Dow gets to the 9400. This expected rally, without great confidence, without big volumes and with continued bad economic reports should result in more volatile moves, but the sell offs should found support. Yesterday's rally was joined by the crude oil, which should continue to try to move higher for a test of $50, this is positive for the stock markets.
So, the rally may be able to get above yesterday's highs, but some consolidation may be seen during the next two days as market digests the last huge move.
For today's trading session, expect two side actions as markets consolidate the last move, on the early going, try to get short near our first resistance level, on a lower opening wait for our second support level to get tested before you try to play a long position, if the SP does not get there, then a double bottom at yesterday's 893.50 low could offer a good long entry with tight stops. Don't overstay your welcome on an any good trade.
TODAY'S SESSION
There is initial resistance is at 909.50-911.00 on the SP, 1216.00-1218.00 on the Nasdaq and 482.40-483.40 on the Russell. Those should be difficult to get exceeded if we'll get some profit taking or a consolidation of the last two days huge advance, but if shorts continue to cover, then the next areas at 914.50-915.50 on the SP, 1223.00-1224.00 on the Nasdaq and 487.20-488.00 on the Russell may get reached. Those levels acted as a good resistance during yesterday's late action, so if the rally stalls there, a decent pullback could happen, however, if the markets break higher look for yesterday's highs to be tested again, those areas are at 919.00-920.00 on the SP, 1232.00-1233.50 on the Nasdaq and 492.30-493.40 on the Russell.
There is good support at 900.00-898.50 on the SP, 1203.00-1201.50 on the Nasdaq and 476.60-475.00 on the Russell. The more time the indexes spend below those areas, greater the chances to see a sizeable pullback, if that happens look for strong support at yesterday's lows at 894.00-893.50 on the SP, 1195.00-1193.00 on the Nasdaq and 471.90-470.50 on the Russell. If those hold, another visit to yesterday's highs may be seen. If the indexes trade below them, look for some orderly selling activity that carries the markets down to 889.50-888.00 on the SP, 1184.00-1183.00 on the Nasdaq and 466.90-465.70 on the Russell. If the indexes can not react from those areas, look for the selling to gain some good momentum. GOOD LUCK.
TODAY'S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 4
926.75-928.00
1248.00-1250.00
497.00-498.80
Resistance 3
919.00-920.00
1232.00-1233.50
492.30-493.40
Resistance 2
914.50-915.50
1223.00-1224.00
487.20-488.00
Resistance 1
909.50-911.00
1216.00-1218.00
482.40-483.40
PIVOT
897.00
1206.75
472.70
Support 1
900.00-898.50
1203.00-1201.50
476.60-475.10
Support 2
894.00-893.50
1195.00-1193.00
471.90-470.50
Support 3
889.50-888.00
1184.00-1183.00
466.90-465.70
Support 4
876.00-875.00
1175.00-1172.50
463.30-461.00
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
1002.98
1346.16
535.14
990.77
1330.34
527.76
971.00
1304.75
515.80
951.23
1279.16
503.84
939.02
1263.34
496.46
919.25
1237.75
484.50
899.48
1212.16
472.54
893.38
1204.25
468.85
887.27
1196.34
465.16
867.50
1170.75
453.20
847.73
1145.16
441.24
835.52
1129.34
433.86
815.75
1103.75
421.90
795.98
1078.16
409.94
783.77
1062.34
402.56
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
937.75
1258.25
498.20
AS DAILY LOW
886.00
1191.00
466.90
Support, pivot and resistance levels courtesy of Arturo Stern. He authors the daily E-mini Trading Advisory, which gives technical analysis on 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.
