E-mini trading advisory for Sept. 28

DAILY TRADING ADVISORY 28-September-2009

New Home Sales up, Durable Goods orders drop higher than forecast during August and Michigan Sentiment increased to its highest level since January 2008 gave way to a fluctuating session after last Thursday’s sell off.

WEEKLY PIVOTS FOR WEEK ENDING 02-October-2009

R3 1090.00

R2 1065.00

R1 1051.50

PP 1051.00

S1 1030.00

S2 1018.00

S3 1011.50

ECONOMIC DATA

None.

WEEKLY RECAP

Markets started the week showing some early weakness but recovered and fluctuated during the session as the Leading Indicators report showed a 0.6% increase indicating that the recovery is gaining ground, the SP lost 2.25 points and settled at 1060.50, the Nasdaq added 7.75 points finishing the day at 1727.75 and the Russell lost 0.40 points closing the day at 613.80. The Dow closed lower by 41 points at 9,778. Tuesday’s session the indexes continued to fluctuate showing good support at high levels, as traders waited for the next day FOMC Policy Statement release, action was slow and quite. Home prices showing a 0.3% increase during the month of July and the session closed with gains, the SP added 6.75 points and settled at 1067.25, the Nasdaq closed at 1734.25, up 6.50 points for the day and the Russell added 4.90 points and settled at 618.70. The Dow closed higher by 51 points at 9829.

Wednesday’s expected results from the FOMC meeting gave traders what they wanted, rates remained unchanged, the Fed will continue with its debt buying plan through March and the economy is showing some improvement, markets rallied on the news but sold off into the end of the day, the SP lost 8.25 points and settled at 1059.00, the Nasdaq closed lower by 8.75 points at 1725.50 and the Russell finished with a 5.40 points loss at 713.40. The Dow lost 81 points finishing the session at 9748.

Thursday’s session kicked off with the news that the U.S. Existing Home Sales fell, its annualized pace of 5.1 million was lower than expected. Initial and Continuing job claims were lower but markets sold off strongly and closed with big losses, the SP lost 14.75 points and settled at 1044.25, the Nasdaq lost 26.00 points closing the day at 1699.50 and the Russell closed lower by 14.30 points at 599.10. The Dow lost 41 points finishing the day at 9707.

Friday’s session economic reports showed that the August durable goods orders dropped 2.4% after rising a revised 4.8 percent in July, New home sales rose 0.7 percent last month and the Michigan Sentiment data which measures consumer confidence came out at its highest level since January 2008, however, the selling pressure continued to be present and while markets fluctuated for most of the session the indexes closed in the red, the SP lost 3.25 points and settled at 1041.00, the Nasdaq lost 2.50 points finishing the week at 1697.00 and the Russell closed lower by 1.70 at 597.40. The Dow lost another 42 points closing at 9665. For the week the different markets closed lower around 2%.

FRIDAY’S MARKET

After fluctuating during the Globex session, the E-mini SP started the day at 1042.25. After posting a double bottom at 1041.00, the SP bounced to 1047.50. With the release of the economic reports, the index pulled back to 1042.50. Unable to break the early low, markets rebound; the SP reached 1049.00 but failed to break higher giving way to another setback to the 1042.00 area. Once more, the index bounced, pulled back to 1040.25, just above the 1039.50 Globex lows and held. The markets try to bounce once more, but seller which remained in full control pushed the indexes to new lows, the SP reached 1036.75. While sitting near the lows for an extended period, the SP posted a new marginal low at 1036.25. As support came in strongly, the SP held the selling pressure and bounced to 1044.00 from where a pullback to the 1042.00 area was bought and the index, with very low trading volumes made it to 1045.50 just to fluctuate in a small range closing with moderate losses. For the day, the SP lost 3.25 points and settled at 1041.00, the Nasdaq lost 2.50 points finishing the week at 1697.00 and the Russell closed lower by 1.70 at 597.40. The Dow lost another 42 points closing at 9665.

MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: Yesterday’s strong sell off may be seen as a first degree correction, a three to four days setback that may give way to another run, this time to new highs. However, for this scenario to be correct and for the markets to move up, the time window must hold, and the 1038.50 area may hold on a closing base. When a reversal as the one that we saw last Wednesday comes from a new high markets indicate some sort of top, so even if today we have a consolidating session, something normal after a wide range trend session, it won’t be easy for the markets to get back to the highs, some elaborated pattern, once the bottom gets posted in this correction may be seen. For today’s trading session, the 1041.00 area may hold, failing there and trading a bit lower may result on a false downside break, so be careful and don’t get short at the lows, look for a possible narrow range session in which the 1040.00-1050.00 range comes into play.” I wrote last Monday: “On the short term, for today’s trading session, markets may be under pressure as long as the 1067.00 area holds, so selling the bounces below that level may result in a good trade. So in conclusion, we could see the markets trading lower for the next three to four sessions, if that happens and the SP holds the 1038.50 area and the Dow the 9600 level, a great buying opportunity for those who lost the last up leg from the 1040.00 area will be present.”

Is this a great buying opportunity or the trend has changed? Will the markets bounce once more and the SP will be able to reach the 1102.00 area?

Last Wednesday’s sell off started after the indexes posted a new high, a reversal from a new high always carries the probability that a sort of top has been posted, the next day, Thursday, showed a wide range downside session in which the SP traded at my 1038.50 area, and Friday, markets were not able to come back, they traded in a sideways pattern and closed near the daily lows. But the SP held the 1038.50 area, it didn’t close below it.

This coming Monday, markets will probably trade with extremely low volumes, it is the Jewish Yom Kippur, so many trades will be absent, another day of consolidation may be seen, but despite that we could see a false downside break, the indexes will have to rally on Tuesday and show follow through during the next session, or the move to the upside is in problems, this means, that a rally on Tuesday that gets reversed breaking the recent lows during next Wednesday will indicate lower prices, and obviously, a short term top. From there, some sideways pattern could be seen, or a sharply correction, how big? First to the 1000.00 area on the SP, breaking below it will indicate a secondary correction.

I also mentioned, last week, that a first degree correction could not push the SP below 1038.50 on a closing base, and that it could not last more than three to four trading session, so the markets are down already three days; we must follow also the time window and not only the price in which the index is trading.

My recommendation for this Monday’s session is to trade both sides of the range, a probable narrow range, and for Tuesday, if the markets area trading lower, if the SP is trading below 1038.50, avoid the long side, but if trading below it is only a false break, the selling pressure must disappear and the markets should close in positive territory, so get long once the indexes area back on the green.

The week is full of economic reports, Consumer Confidence, final GDP for the second quarter, Personal Income and spending and much more that culminates with next Friday September Job Markets data, so get ready for high volatility and great trading opportunities.

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

1055.50-1056.50

1714.00-1715.00

610.80-611.50

Resistance 3

1051.50-1052.00

1707.00-1708.00

606.50-607.80

Resistance 2

1048.25-1049.50

1703.00-1704.00

602.80-603.00

Resistance 1

1043.50-1045.25

1699.00-1700.50

599.30-600.20

PIVOT

1042.25

1698.25

597.90

Support 1

1039.50-1038.50

1695.00-1693.00

595.50-594.60

Support 2

1035.00-1033.50

1688.00-1687.00

592.60-591.80

Support 3

1031.00-1030.00

1682.00-1680.00

590.20-588.80

Support 4

1026.25-1024.00

1674.00-1673.00

585.60-584.10

S&P

NASDAQ

RUSSELL

FIBONACCI

FIBONACCI

FIBONACCI

1105.81

1795.06

646.7

1084.19

1762.01

630.0

1070.94

1741.76

619.8

1062.75

1729.25

613.5

1057.69

1721.51

609.6

1049.50

1709.00

603.3

1044.44

1701.26

599.4

1042.88

1698.88

598.2

1041.31

1696.49

597.0

1036.25

1688.75

593.1

1028.06

1676.24

586.8

1023.00

1668.50

582.9

1014.81

1655.99

576.6

1001.56

1635.74

566.4

979.94

1602.69

549.8

DAILY PROJECTIONS

S&P

NASDAQ

RUSSELL

AS DAILY HIGH

1045.25

1703.00

600.50

AS DAILY LOW

1032.00

1682.00

590.20

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.

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