E-mini trading advisory 7-31-2009

Initial claims at 584K, Continuing Claims slightly lower and GE upgrade gave way to a strong rally

ECONOMIC DATA

8:30 AM GDP- adv.

8:30 AM Core PCE

8:30 AM Chain Deflator-adv.

8:30 AM Employment Cost Index

9:45 AM Chicago PMI

YESTERDAY’S MARKET

Markets rallied during the night giving way to a strong opening, the E-mini SP started the session at 984.00 and after pulling back to 982.00 it bounced to 985.25. Unable to push above the Globex highs, the index pulled back to 981.00 from where it rallied to 986.25, once that level get exceeded, the index rallied to 991.00. After a small pullback to 988.75 the markets spiked, the SP reached 992.50 and the NQ 1629.25. As shorts continued to cover, the SP reached 994.00. After holding near the highs and with some signs of toping, the SP pulled back to 987.00. The SP slowly bounced and reached 892.00 just to pullback once more but holding the sideways pattern. After a few attempts to break above 992.50 and during the last hour of the session the profit taking move pushed the index down to 986.00 from where the index bounced a couple of points just to get sold reaching 982.25. A bounce attempt failed and the index closed at the early lows, for the day, the SP closed higher by 7.00 points at 982.00, the Nasdaq added 6.25 points and settled at 1607.00 and the Russell closed higher by 7.30 points at 554.90. The Dow closed up by 83 points at 9154.

MARKET COMMENTARY AND OUTLOOK

Markets opened with a strong gap, pushed higher and sold off into the last hour of the session closing in a short term downtrend.

During the last few sessions I have mentioned that one of the ways in which a move could get exhausted is by a wide opening gap in the same direction of the trend that gets reversed during the same trading session, despite that the markets did not close on the red, this scenario has the chances to be valid. On the other side, the strong rally may get consolidated and another attempt to reach yesterday’s highs may be seen, so under this circumstances, if the opening is quite we could see some back and forth action as the markets work yesterday’s move.

Taking into account that it is end of month, yesterday’s sell off may continue giving way to some profit taking, the same happened during the end of last month. So the resistance areas, the previous highs around 985.00-976.50 will be important for today’s trading session. I consider that all the time that the SP is trading below that level we could see some additional downside. The best case that I can see for this end of month, and with all the economic numbers to get released before the opening is a narrow range session where the markets close around yesterday’s levels.

It is very important to point that a possible top has been posted, but once more, only a correction that exceeds more than four trading session or a wide downside session that fail the next day to trade above the previous close will be a clear indicator that the rally is over.

TODAY’S SESSION

For today’s trading roadmap and intraday updates, please read the authors bio.

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

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