Stocks fluctuate as they consolidate the last rally. Morgan Stanley reports a wider than expected loss. Crude oil slips as dollar lost value after the Fed slashed rates. Chrysler and Ford idle factories.
ECONOMIC DATA
8:30 AM Initial Claims
10:00 AM Leading Indicators
10:00 AM Philadelphia Fed
YESTERDAY’S MARKET
After trading sharply lower during the Globex session, the SP started the day at 904.00 from where it pushed down to 897.75 where support came in. The index bounced to 906.50 but failed on its attempt to break higher. Led by the weakness on the Nasdaq, the SP fell to a new intraday low at 895.00. Unable to gain momentum to continue lower, the SP bounced all the way up to 907.00 backed off to 898.00 and in an erratic move pushed all the way up to 910.25. A five point pullback held the sell off attempt and with the Russell pushing strongly higher, the index moved up reaching 918.25. The SP pulled back once more just to get bough and pushing higher posting a double top. The failure to break higher resulted in a profit taking move driving the SP down to 903.75. The SP formed a bottom and rallied to 913.25 from where it pulled back to 908.25, bounced back to 913.50, tested 903.75 holding and bouncing back once more to 913.00 to finally push lower during the last minutes of the session. For the day, the SP lost 9.50 points closing the session at 903.25, the Nasdaq gave back 12.50 points and settled at 1228.50 and the Russell ended up by 4 points at 483.00. The Dow lost 99 point at 8824.
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MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “Well, the Fed did not disappoint, and regardless of the poor economic data, pointing for deflation and signaling additional contraction on the housing sector, markets pushed strongly higher. Last week highs at 919.00 on the SP and 9000 on the Dow will have to get exceeded in order to get a confirmation for yesterday’s huge breakout of the last triangle formation. However, the close above the 908.50-905.50 levels on the SP should be seen positively. I wrote in yesterday’s report that many times the move seen during a Fed’s day gets reversed during the next session, I don’t know if there in enough bears out there to get a totally reversal from yesterday’s rally, but at least, we could see some consolidation from yesterday’s move. Last week 9000 level on the Dow was clearly rejected, so selling the rallies all the time that the SP and the Dow do not break above last week highs may be the way to go for today’s trading session. That does mot mean that in a n expected consolidation opportunities can not be found on both sides of the markets, so an early sell off that pushes the markets down strong could result in a late rally, but if the indexes can not move higher showing some follow through for yesterday’s move, the 890.00 on the SP should be visited today.”
Yesterday’s consolidating session and erratic conditions indicates the lack of momentum in this artificial short term rally generated by the recent rate cut, expectations about the automakers bailout plan and possible stimulus package to be released next month, all this together with the “Santa” effect where everybody calls for a seasonal rally may keep this market afloat on this struggling upside move, that maybe, will push the SP to the 940.00-960.00 level. However, there is a lot of pending fund liquidations and deleveraging is still present in the markets. So, despite that the market should be able to try and move a bit higher, it will set up another mid-term short opportunity that probably will result in a new low. How deep will the markets go? We’ll get the answer once the recent rally gets exhausted. The Dow and SP each traded quietly sideways during the session, as resistance continues to be a factor. So, for this rally to continue, the recent highs will have to get exceeded with strong momentum. If the markets fail to push higher, then the rally that I was expecting to reach at least that 940.00 area on the SP and 9400 on the Dow, will just be another “Santa” dream.
Looking at yesterday’s trading action we saw the consolidation after Tuesday’s breakout rally, but all of the indexes are still fighting against their recent highs, this kind of markets behavior, increase trading risk, and if this conditions continue during today’s session, reducing the size of your position sounds good.
During today’s trading session we’ll get the release of the weekly initial claims data and a bit later the Leading Indicators and Philadelphia Fed numbers, this should dictate the early moves on the markets, and later, tomorrow’s expirations at the opening of the trading session, will force many traders to offset their positions today before the close. So, volatile conditions could be present from the open of the session.
Until the recent highs around 918.00 on the S&Ps and 9000 on the Dow get decisive broken, trading both sides of the range should be the way to go. Keep a close eye on the Russell that acted with strength during yesterday’s session, if today, is joined by the Nasdaq, probably will see the 930.00 on the SP, however, if conditions area mixed, look for another difficult trading session as it happened yesterday. A weak opening will start to indicate another possible correction, but keep in mind that the sell off attempts have been met with strong support. So, if we have a negative start for the session and the SP trades below the 900.00 area don’t run to pick a bottom, better wait until that index trades above the pivot pint and the other markets show signs of life.
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
926.50-928.00
1267.00-1269.00
497.20-498.70
Resistance 3
918.00-920.00
1248.00-1250.00
492.90-493.90
Resistance 2
911.00-912.00
1239.00-1241.00
488.90-490.20
Resistance 1
905.00-906.00
1232.00-1233.50
484.50-486.30
PIVOT
902.50
1226.00
481.60
Support 1
900.00-898.00
1224.00-1221.00
479.80-478.00
Support 2
893.50-892.00
1215.00-1213.00
475.60-474.80
Support 3
887.00-886.50
1207.00-1206.00
471.80-471.00
Support 4
882.00-881.00
1196.00-1194.00
464.10-463.30
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
969.22
1308.66
523.88
961.78
1299.34
519.12
949.75
1284.25
511.40
937.72
1269.16
503.68
930.28
1259.84
498.92
918.25
1244.75
491.20
906.22
1229.66
483.48
902.50
1225.00
481.10
898.78
1220.34
478.72
886.75
1205.25
471.00
874.72
1190.16
463.28
867.28
1180.84
458.52
855.25
1165.75
450.80
843.22
1150.66
443.08
835.78
1141.34
438.32
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
910.50
1236.00
497.00
AS DAILY LOW
879.00
1197.00
476.80
Support, Pivot and Resistance levels courtesy of Arturo Stern. He authors the E-mini Daily 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.
