DAILY TRADING ADVISORY 02-February-2009
Exxon-Mobile fourth quarter net profit drops 33%, Honeywell and P&G profits rise, Japanese industrial production falling - 9.6% m/m, GDP shrinks 3.8% during 4Q, the most in 26 years as personal consumption deteriorate. Chicago PMI lower than expected
WEEKLY PIVOTS FOR WEEK ENDING 06- February-2008
R3 901.00
R2 862.00
R1 849.50
PP 836.50
S1 816.50
S2 896.00
S3 771.00
ECONOMIC DATA
8:30 AM Personal Income
8:30 AM Personal Spending
10:00AM Construction Spending
10:00 AM ISM Index
WEEKLY RECAP
Markets closed their worst January in history. Last Monday’s premarket action kept the futures indexes under strong pressure, after trading as low as 810.75 during the Globex session, markets started the session a lot better with the news that Barclays won't need to rise additional capital, Pfizer acquisition of Wyeth for $68 billion, the dramatic lower earnings report and 20K jobs cut by Caterpillar adding to Home Depot which is laying off 7K jobs. The economic reports came out better than or not as bad as expected: Leading Indicators was up by .3% and December Existing Home sales up by 6.5% resulted in a positive close for the U.S. equity markets. The SP managed to add 7.25 points ending the session at 830.75, the Nasdaq added 15.25 points and settled at 1179.50 and the Russell added 6.70 ending the day at 446.10. The Dow closed higher by 38.00 points at 8112.
Most of the Tuesday's Globex session markets traded in positive territory, regardless that the corporate reports continued to be ugly markets closed higher for the day. DuPont shifted to quarterly losses, Delta missed earnings expectations and Corning announced that it is cutting 3500 jobs. The S&P Case Shiller report which measures home values, posted an 18.2% annual drop in November, also Consumer Confidence fell to a record low, but in front of Wednesday's FOMC meeting and policy statements markets held. For the day the SP added 8.50 points closing the session at 839.25, the Nasdaq gained 6.25 points and settled at 1185.75 and the Russell closed higher by 5.00 points at 451.10.
Wednesday's session markets opened sharply higher, rumors that the Government will create a "Bad Bank", an institution that will absorb all the toxic assets from the banks and clean their balance sheet so they can start to lend money; additional, SAP and Yahoo reported earnings exceeding lowered estimates. Later in the day, the FED left rates unchanged signaling that it could start to buy long term Treasuries. Also the House passed its version of an $819 billion stimulus bill without Republican support. Markets held theirs gains until the end of the session. The SP added 32.25 points and settled at 871.50, the Nasdaq closed higher by 45.50 points at 1231.25 and the Russell ended higher by 21.20 points ending the session at 472.30. The Dow finally broke above the 8300 area closing higher by 200 points at 8375.
Thursday's was the opposite, a negative day session. Ford $5.9 billion loss, Colgate better than expected earnings, Altria and Shell showed lower earnings; Initial Claims came out above expectations at 588K and Continuing claims at 4.7 million, a new high. Durable good orders came out showing a 2.6% decrease as business spending slumped, if that was not enough for investors; New Home Sales tumbled 14.7% to a record low. For the day, the SP lost 21.75 points and settled at 842.75, the Nasdaq ended lower by 25.25 points at 1206.00 and the Russell ended the day at 454.70 after losing 17.60 points. The Dow gave back the previous day gains closing the session at 8149, a 226 point loss. Weakness continued for Friday, when the weekly surprise was the Q4 GDP report. Economists expected a 5.5% decline, but the advance report indicated a drop of "only" 3.8% with notorious weakness in personal consumption. The session a negative one, took the markets back to their most critical short term support levels. For the day, the SP lost 20.25 points and settled at 822.50 the Nasdaq ended lower by 26.75 at 1179.25 and the Russell lost 12.10 closing the week at 442.60. The Dow lost 148 points closing at the key 8000 mark.
FRIDAY'S MARKETS
After trading at 833.00 during the Globex session, the E-mini SP started the day at 845.75 and pushed up to 848.00 from where it backed off to 845.00 and bounced once more to the 848.00 level. Unable to break higher, the SP sold off to 835.75 from where it moved up a couple of points just to get sold with strong momentum pushing all the way down to 828.75. The index traded in a narrow range for a few minutes, moved down to 828.50 where the small double bottom resulted in a small short covering rally to 834.00. Unable to break higher, the SP pushed to a new intraday low just at our 825.25 downside objective, then, it bounced to 830.00 pulled back to 827.50 where the higher low held pushing the index all the way up to 837.50. After spending a few minutes trying to break up, the move failed and the SP pushed lower to a new intraday low at 823.25 from where a rebound managed to reach 830.25 just to fail and in a struggling downside move reach a new intraday low at 821.25. After trying to hold there and once the Nasdaq made a new low the SP pushed down to 817.50 from where it bounced back to 824.75 holding near that level into the close. For the day, the SP lost 20.25 points and settled at 822.50 the Nasdaq ended lower by 26.75 at 1179.25 and the Russell lost 12.10 closing the week at 442.60. The Dow lost 148 points closing at the key 8000 mark.
MARKET COMMENTARY AND OUTLOOK
Last week’s three days rally failed where the countertrend bounce that resulted from many consecutive successful test of the 800.00 support area on the SP was due to do so. I have explained many times the extension in time of a countertrend movement in the markets against the primary trend, a first degree move usually last between 1-4 days, and this last rally was only a countertrend one that get exhausted by the huge opening gap seen last Wednesday.
News about possible bailouts, stimulus packages and "Bad banks", other ones call it bad ideas, can result in erratic wild moves, but the real situation in the economy, corporate reports and economic data does not indicate that the markets have hit a bottom. During this trading week, more to come, with the main report being Friday’s January unemployment figures.
My "AS DAILY PROJECTED LOW" for today's trading session, indicates the 804.25 level as a possible objective for the last two days sell off, so if the markets continue to trade lower, that level should be tested, if the markets hold above it on the close, then there is a possibility that the indexes will continue to trade in the range, also, it will maintain open the possibility of another strong rally. So this week has huge importance, a break below the 804.25 area that recovers above that price during the week will place the indexes if not in a strong position at least in a neutral one. I don't think the markets are ready yet for another wide leg down that breaks below the November lows, but I do think that a marginal break of the 800.00 support level on the SP can happen before another "Bad Bank, Bad policy" surprise the markets.
For today's trading session, we'll get the Personal income and spending numbers for the month of December, if they come out as expected we should see some bounce from the already slightly negative Globex session, but if they report is worse than consensus, we could see a continuation of this last fast downtrend move. So all the time that the SP is trading below the weekly pivot point of 836.50, we should favor the short side, and, if you do trade on the long side, thinking that after the last two days sell off we could see some consolidation waiting for this week "new ideas" and economic reports, just tighten your stops and wait for our support levels to get hit.
TODAY'S SESSION
There is initial resistance at 825.50-826.50 on the SP, 1183.00-1184.00 on the Nasdaq and 444.40-446.10 on the Russell. Those should offer some resistance if the markets open with losses, but once the get exceeded, the indexes should be able to reach 829.00-831.00 on the SP, 1187.00-1188.00 on the Nasdaq and 448.80-450.50 on the Russell.
TODAY'S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 4
839.50-841.50
1202.00-1204.00
458.40-459.60
Resistance 3
834.50-835.75
1193.00-1194.00
453.20-454.50
Resistance 2
829.00-831.00
1187.00-1188.00
448.80-450.50
Resistance 1
825.50-826.50
1183.00-1184.00
444.40-446.10
PIVOT
829.75
1189.00
447.10
Support 1
819.50-818.00
1172.00-1169.50
440.80-439.10
Support 2
816.00-814.50
1163.00-1162.00
436.20-435.10
Support 3
810.00-808.50
1156.00-1155.00
432.00-431.30
Support 4
805.00-804.00
1149.50-1148.00
427.80-426.20
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
899.97
1279.78
490.23
892.53
1270.22
485.67
880.50
1254.75
478.30
868.47
1239.28
470.93
861.03
1229.72
466.37
849.00
1214.25
459.00
836.97
1198.78
451.63
833.25
1194.00
449.35
829.53
1189.22
447.07
817.50
1173.75
439.70
805.47
1158.28
432.33
798.03
1148.72
427.77
786.00
1133.25
420.40
773.97
1117.78
413.03
766.53
1108.22
408.47
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
835.75
1196.50
450.80
AS DAILY LOW
804.25
1156.25
431.50
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.
