Compensation limits for executives, toxic assets guarantees still in discussion, Time Warner losses and lower revenues, ADP Employment, private sector payrolls fell by 522K in January, a bit better than expected and the ISM Services index increased to 42.9 resulted in an early rally that got reversed sending the indexes down to a negative close as Bank of America slides 10%. After hours, Cisco earnings down, incoming orders declined dramatically in January.
ECONOMIC DATA
8:30 AM Initial Claims
8:30 AM Productivity
10:00 AM Factory Orders
YESTERDAY’S MARKET
For most of the nightly session, futures markets traded in positive territory. The E-mini SP started the day at 838.75 and bounced to 839.50, just a bit below the Globex 840.75 high. Unable to break higher the index pulled back to 835.00 where buyers stepped in and in an impressive move pushed the SP all the way up to 842.00. After a feeble pullback, the index pushed higher reaching 849.50 where the rally stalled. After sitting for a long time near the highs, the SP traded in a narrow range and finally broke lower testing the 843.50 area. Once more the markets stopped at the lows for a long period and unable to bounce the SP pushed lower reaching 837.75. The E-mini SP bounced back to 842.00 where sellers stepped in pushing the index all the way down to 827.50 where support came in. The SP moved up to 831.50 fell to 828.50 and bounced once more to the 831.50 level putting a double top that resulted in a move to new lows at 826.00. After holding the new low, markets rebounded; the SP traded back at 831.75 but failed to break higher, another late bounce pushed the SP to 834.00 from where it pulled back into the end. For the day, the SP lost 1.75 points closing the session at 829.75, the Nasdaq added 6.25 points and settled at 1214.00 and the Russell closed unchanged for the session at 449.10. The Dow lost 121 points closing the session at 7956.
MARKET COMMENTARY AND OUTLOOK
We came into yesterday’s session following a slightly positive momentum, the early rally was impressive but it failed to break above the last Friday’s Globex highs, the result, a strong reversal. Markets seem to be comfortable trading in the 800.00-850.00 range and probably will continue to hold these ranges during today’s trading session. Obviously, at the moment that the recent ranges get broken, a major breakout will happen.
Everybody seems to be waiting for tomorrow’s unemployment reports, later traders will be waiting for the stimulus plan and the decision about the toxic assets, so all this uncertainty is resulting in a sideways pattern that at this time, looks that it will get broken to the downside. Too many tests of the 800.00 area on the SP make me think that the market will trade below that level, a false break, a higher low around the November lows or anew low, could be the next move, but I do expect the “obvious support to get violated. The same is true for the other indexes, in particular the Dow, which has been the weakest, a break of the 7800 level could indicate much lower prices.
Yesterday’s close near the lows has placed the indexes in a difficult position, and markets may be considered weak all the time that yesterday’s highs remain intact, the next “thing” in the daily chart could be a wide range down session, and if that do not happens, with most of the traders on the sidelines waiting for tomorrow’s economic reports, then we could see a narrow range session where markets show more consolidation before the next breakout attempt, and if the SP is able to hold, after yesterday’s higher high and higher low, the markets could rally. It is very difficult to forecast the next move all the time that the markets are trading in a sideways pattern, but if today, the markets hold, it will start to look like it wants to go up before the next test of the November lows.
I have to favor the short side, in particular all the time that my pivot points can hold, but with the Nasdaq already showing a big sell off during the Globex session, as a result of yesterday’s Cisco earnings report and outlook we could see some short covering during the early going, and then maybe establish a narrow trading range for today’s session..
TODAY’S SESSION
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 4
849.25-850.00
1242.00-1244.00
465.80-466.90
Resistance 3
842.50-844.00
1235.50-1236.00
458.00-458.40
Resistance 2
837.50-839.00
1224.50-1226.00
454.10-455.00
Resistance 1
832.00-834.00
1218.00-1219.50
450.80-452.10
PIVOT
835.00
1220.00
451.20
Support 1
827.50-825.75
1210.00-1208.00
447.60-446.10
Support 2
823.00-821.00
1203.00-1201.00
443.20-442.10
Support 3
816.75-816.00
1196.00-1194.50
439.40-438.20
Support 4
811.50-810.50
1188.00-1186.00
435.00-433.90
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
887.52
1306.66
486.61
881.98
1297.34
482.79
873.00
1282.25
476.60
864.02
1267.16
470.41
858.48
1257.84
466.59
849.50
1242.75
460.40
840.52
1227.66
454.21
837.75
1223.00
452.30
834.98
1218.34
450.39
826.00
1203.25
444.20
817.02
1188.16
438.01
811.48
1178.84
434.19
802.50
1163.75
428.00
793.52
1148.66
421.81
787.98
1139.34
417.99
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
839.50
1247.50
454.80
AS DAILY LOW
816.00
1208.00
438.60
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.
