E-mini trading advisory for Aug. 5

Personal Income down 1.3%, Personal Spending up .4% and Pending Home Sales up 3.6% resulted in a consolidating session after Monday’s rally. Markets pushed to new highs into the close.

ECONOMIC DATA

8:15 AM ADP Employment change

10:00 AM Factory Orders

10:00 AM ISM Services

10:35 AM Crude Inventories

YESTERDAY’S MARKET

After trading lower during the Globex session, the E-mini SP started the day at 995.75 from where it pulled back a point and bounced to 999.25. The index pulled back to 994.50 where a double bottom gave way to a slow early uptrend, the SP reached my upside objective at 1004.00. Unable to break higher, the index started to push down reaching 997.00 but the move failed to gain the necessary momentum and with very light trading volumes, the SP bounced back to 1001.75. Once more the move get repeated, the SP pulled back to 997.00 and pushed to a new marginal high during the last minutes of the session. For the day, the SP closed at its daily high at 1005.00, the Nasdaq ended higher by 3.50 points at 1630.75 and the Russell gained 7.90 points finishing the session at 550.80. The Dow added 33 points closing at 9320.

MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “Markets continued to rally as the move may be in its last up leg before some correction is seen. I have been calling the 1000.00 upside objective on the SP and have pointed also that higher prices may be seen before this move is over. The wide up opening gaps and the closes near the highs, always could indicate that the trend, in this case the strong uptrend, may be getting exhausted, and that at some moment the markets will get reversed in a correction move or at least will trade on a sideways pattern consolidating the previous move, in this case, the strong rally. The fact that the markets were not able to reverse last week wide opening gap indicated that the rally was in a very strong position, yesterday’s repetition of the same situation plus the close at the daily highs gives once more the impression that the move could get corrected, however, another push may be possible, the next important areas are the 1008.00, 1038.00 and 1060.00. For today’s trading session, the short squeeze may continue, but beware of a good reversal from the 1008.00 area or some profit taking once the index trades below 995.00, but if that level do not get violated by more than 1.75 points, the first decent pullback may be a buying opportunity.”

Yesterday’s consolidating session is something normal after big moves, like the one that we saw last Monday where the SP was able to trade above the 1000.00 mark. Despite the fact that during the last two weeks I was writing about the possibilities that the SP will test the 1000.00 area, I am really surprised that the pullbacks that happened during the last two weeks have been very limited. We know that this strong rally is based in expectations of better economic indicators, this summer rally has been able to hold in price and time, and that makes very difficult to take a short position.

However, the wide up gap opening sessions, the several closes near the daily highs, not only indicate that the trend is strong, they also indicate that the rally may be on its exhausting phase, at some point we will have to get a wider correction. But the trend is strong and intact, and if SP may be able to reach the 1008.00, and if that does not place a temporal top, then 1038.00 or even 1060.00 may be seen before this rally is over.

So for traders holding a mid term position, there is no evidence that the markets will turn around at this point, for that to happen, a pullback may exceed the four day period, or the SP will have to break below the 963.00 area, the conclusion is that if we have a negative session, it will be a buying opportunity.

Today, we have a few important economic indicators to get released, traders will closely watch the ADP Employment data, which measures the private job market, and the ISM Services index which counts for more than 70% of the economy, so, if those come out not worst than expected another strong session may be seen, just beware of some profit taking the first time the 1008.00 level gets tested.

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

1024.00-1025.00

1655.00-1655.50

584.20-585.50

Resistance 3

1016.50-1018.00

1646.50-1648.00

578.50-580.10

Resistance 2

1010.50-1012.00

1640.00-1641.50

575.80-576.50

Resistance 1

1006.50-1008.00

1635.25-1637.00

572.00-573.30

PIVOT

1000.50

1625.25

566.70

Support 1

1003.50-1002.50

1627.00-1625.00

568.10-566.80

Support 2

999.25-997.00

1621.00-1619.75

564.20-562.80

Support 3

993.00-992.00

1612.00-1610.50

560.50-559.10

Support 4

988.00-986.50

1605.00-1604.00

552.50-551.30

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

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