E-mini trading advisory for Aug. 18

Japan’s lower than expected growth, worries about consumer spending, Global stock’s sell off and NY Empire manufacturing Index better than expected gave way to a sharply lower opening. Later, Homebuilders Sentiment index rises for the month of August

ECONOMIC DATA

8:30 AM PPI

8:30 AM Core PPI

8:30 AM Building Permits

8:30 AM Housing Starts

YESTERDAY’S MARKET

After trading sharply lower during the Globex session, the E-mini SP started the day at 984.00, after pulling back a point, bounced to 984.50 just to get sold to a new low at 979.25 and then to 977.50 from where the index bounced to 980.50 and to 981.75. After three failed attempts to break higher, the SP pulled back to 978.50. Markets tried to hold, but the failure of the Nasdaq to move higher and its new low kept the markets under pressure giving way to a new marginal low on the SP at 977.25. The double bottom gave way to a bounce that reached 983.50, unable to break higher; the index backed off once more and traded in a narrow range between the daily lows and the 982.00 level. After trading for more than three hours on that sideways patter, the SP pushed lower, tested the lows and bounced to 980.00 and pushed down to a new intraday low at 975.50 before bouncing into the close. For the day, the SP lost 27.75 points and settled at 978.00, the Nasdaq ended lower by 49.00 points at 1566.00 and the Russell finished at 548.40, minus 17.50 points. The Dow lost 186 points closing the day at 9135.

MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “Markets sold off from their resistance levels but managed to come back into the end of the session. I went Thursday night to sleep with the wrong idea that the markets were ready for their next and maybe last upside leg, and that resulted wrong. Finally the rally posted a top from where it get severely sold, this sell off came after the SP almost reached the 38.2 percent Fibonacci level measured from the all time highs to the March low, and the Nasdaq respected the 1632.00 ceiling. During all the week the index traded in a range that has not been broke to either side, on the support area, we have the 992.00 level on the SP and around 1590.00 on the NQ, on the upper side, the 1016.00 and 1632.00 areas, so until the markets make the breakout of this wide consolidation, this sideways pattern will continue to be in play. For today’s trading session, Friday’s wide trading range session, may give way to an inside day, I may be selling the rallies and buying the dips, however, and its not that I want to insist too much with my still bullish scenario, I will try to play the green if the Nasdaq is trading in positive territory, but I will be forced to change this light bullishness if the SP will trade below the 992.00 area.”

As the markets opened under extreme selling pressure breaking the two week sideways pattern to the downside, I did not have many choices on the long side, some small long trades with a breakeven result is what I did. During the last few weeks I made many calls to traders holding a long position to reduce the size of their exposure, surely I was waiting for an upside breakout, but I quoted that the rally was fragile.

Yesterday’s wide range downside session in which the NQ leaded the move may see some rebound attempt during today’s trading session, but at this point markets have make a turn down and selling the rallies until the SP trades back above the 1001.50 area and the NQ breaks above 1604.00 may be the way to go for position traders. These coming two weeks period, until Labor Day, do not offer the best trading conditions, light volumes and semi empty trading floors are similar to the end of year, so lighten positions for those who will be present is recommended.

I may be wrong, as many times, but this week in which the August option expiration will take place may give way a bouncing attempt, but the extension of yesterday’s range does not call for new highs or low, a consolidation session with a downside bias or an inside day are the possible scenarios.

As in the past, the Nasdaq seems to be leading the trend, so following that index may be the best thing to do, if the markets try to come back, that index must be over performing the SP, but if the 972.00-968.50 areas on the SP or the 951.00 will be tested during this and the following sessions, the bounces should be limited and may result in more selling opportunities, unless all the indexes are trading solid in the green, selling the bounces after the rallies stall is the way to go, my bullishness will have to wait for this correction to end.

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 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