Initial Claims up by 54,000 at 524,000; continuing claims 4.5 million; PPI down by 1.9% and NY Empire State Index at 22.00 indicating weakness; JP Morgan post small profit and Apple’s Jobs health problems; BAC and Citigroup continue to plunge, giving way to another sell off on the equity markets; that then strongly reversed, pushing the markets to a positive close once the news that Bank of America will receive another $20 billion to support Merrill deal was out; after hours, Intel reported that profit plunged 90% and sales slipped 23% during the last three months of the year
ECONOMIC DATA8:30 AM CPI8:30 AM Core CPI9:15 AM Capacity Utilization9:15 AM Industrial Production9:55 AM Michigan Sentiment–preliminary
YESTERDAY’S MARKETSideways action during the Globex session resulted in a slightly lower opening for the U.S. equity markets. The E-mini S&P 500 opened the session at 837.00 from where it sold off strongly reaching 824.75 just before the Philadelphia Fed numbers got release, the E-mini S&P 500 bounced to 830.50 and get sold once more reaching 817.00. A small double bottom at that level resulted in a bounce to 820.50 and a quick drop to a new low at 816.50. As the extreme selling pressure continued, the E-mini S&P 500 bounced a couple of points and pushed to a new marginal low at 815.75, just below our 816.00 support levels. As the selling pressure lost its momentum, the E-mini S&P 500 bounced to 821.50, backed off a bit and continued higher reaching 824.50.Unable to gain the momentum to continue higher, the E-mini S&P 500 pulled back all the way to the lows. After posting a new low at 812.75, the E-mini S&P 500 bounced to 820.50, pulled back two points and continued higher to 826.00 and then 837.00, all this leaded by the Nasdaq but joined by the other indexes. After trading at 838.50, the E-mini S&P 500 pulled back to 834.00 just to continue higher reaching Wednesday’s settlement and printing a new daily high at 843.25. As the huge reversal continued, the index pushed higher fueled by t late shorts reaching 848.50. After reaching that area the E-mini S&P 500 pulled back to 839.50 where buyers stepped back in pushing the index back to 847.00 from where it sold off during the last hour of the session reaching 829.50 just to bounce for the close, the E-mini S&P 500 ended the session with a half point loss at 839.25, the Nasdaq added 11.75 points and settled at 1177.25 and the Russell gained 7.50 points closing the session at 459.90. The Dow managed to close up by 12 points at 8212.
MARKET COMMENTARY AND OUTLOOKLast Tuesday I wrote: “After holding since last November markets have accelerate their downtrend and this increased selling pressures with high volumes may continue once yesterday’s lows get broken. JP Morgan will report today and Citigroup tomorrow, both of them before their programmed date. None of this numbers will be good, and the consequences will be seen in the markets, the E-mini S&P 500 below 831.00 will indicate 818.00, 780.00 and 740.00; the Dow 8000, 7800 and 7500. However, markets have already posted a dramatic fall during the week and a countertrend rally could be near. The trading pattern has showed that the indexes have been trading the last months in a wide range, 850.00 to 920.00 on the E-mini S&P 500 and 8300 to 9000 on the Dow; so markets should try to return to the range, will it happen today after another down spike, or once President elected Obama occupies the chair and then a “honeymoon” rally began?, it may be. Meanwhile bears have the control. To be a buyer in these markets, traders will have to see some evidence that the sell off has dried and a short-term low has been posted in the charts. Yesterday’s lows on the E-mini S&P 500 coincide with some other lows posted during last December; will the market rally from here? It can happen, but for those who maintain a long short term position and get hammered during this week, the exit may be near if yesterday’s lows get broken, when they will be forced out, you know the markets, they will rally without them; for those who want to get short at these levels for more than a simple intraday trade, it is probably too late, at the moment that a reversal will happen, they will only fuel the move, so the less risky trade is to stay on the sidelines or wait for a countertrend rally to get short, a confirmation that a low is in place will require a rally that last more than 11 days, if not any countertrend move will be only a selling opportunity as it seems that the bear campaign has resumed.”
Yesterday’s early sell off certainly exhausted the downtrend move leaving many late shorts trapped at levels well below the settlements, I clearly indicated that it was too late to take a short position and stick to it. This last downside move was done with better volumes and probably, the key reversal correction seen from yesterday’s lows has more room to go. Of curse, we cannot call for a low until this rally exceeds three to five days, or push prices above the 888.00-892.00 areas on the E-mini S&P 500 and 8600-8800 on the Dow. Therefore, the scenario for these coming days is a countertrend rally that fails after three days or a strong move that makes all the way up to the last highs, and then probably fail as this bear campaign has not ended yet. Yesterday I wrote that the markets are trading in a wide range, obviously, they were broken during yesterday’s session, but the close was positive, and at least for today’s session and next week events, markets should be able to hold. The daily charts show that the markets posted a bullish reversal and if they can continue to move higher, we could see a continuation pattern that could easily spark a big rally back to 868.50 during the next two sessions. The Nasdaq, the key for yesterday’s reversal has reached the resistance area seen in the daily charts and its sitting just below the trend line formed from the 1280.00s high, so trading above the 1200.00 level could push that index at least to the 1250.00-1260.00 double top before that market starts its next move.
For today’s trading session, Citigroup will report before the opening, how big are their losses, who knows, its situation is really bad. Later we get the CPI numbers, which should continue to show deflation as falling asset prices are likely to continue for most of 2009. Also we will know the last figures for Industrial production, every new low in the manufacturing area, is another loss job that never will come back. And for the end, the January option expiration that could increase volatility during the second half of the session.
I personally don’t like to trade on expiration dates, but I will favor the long side on a successful test of yesterday’s late lows around 830.00 on the E-mini S&P 500 or a breakout above the 844.50 level.
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
858.00-860.00
1214.00-1216.50
480.50-480.70
Resistance 3
854.25-855.50
1206.00-1208.00
474.90-475.50
Resistance 2
848.00-849.00
1191.00-1193.00
468.40-470.30
Resistance 1
842.50-844.00
1184.00-1186.00
463.40-464.90
PIVOT
833.50
1169.00
453.40
Support 1
835.00-834.00
1173.00-1170.50
457.50-456.00
Support 2
831.00-828.50
1165.00-1164.00
453.90-452.40
Support 3
820.00-818.50
1160.00-1157.00
448.20-447.10
Support 4
810.00-808.50
1148.00-1146.00
444.30-443.00
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
906.34
1275.95
507.97
897.91
1263.56
501.53
884.25
1243.50
491.10
870.59
1223.45
480.67
862.16
1211.06
474.23
848.50
1191.00
463.80
834.84
1170.95
453.37
830.63
1164.75
450.15
826.41
1158.56
446.93
812.75
1138.50
436.50
799.09
1118.45
426.07
790.66
1106.06
419.63
777.00
1086.00
409.20
763.34
1065.95
398.77
754.91
1053.56
392.33
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
843.75
1210.00
475.50
AS DAILY LOW
808.00
1157.00
458.20
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.
