Google delivers good looking results. Microsoft to cut 5,000 jobs. Markets traded down during last week. GE reported as expected with a 46% decline in profits but not cutting dividends and expecting to keep its triple A rating. AMD, Capital One and Xerox shares retreat. Markets started the session sharply lower but managed to recover most of the losses.
WEEKLY PIVOTS FOR WEEK ENDING Jan. 30, 2008
R3 897.00R2 861.00R1 842.00 PP 829.00S1 817.00 S2 792.50S3 776.25
ECONOMIC DATA10:00 AM Existing Home Sales10:00 AM Leading Indicators
WEEKLY RECAPThis was another negative week for the markets as concerns about recession and earnings growth. Last shortened holiday week posted its high during Sunday’s Globex nightly session reaching 865.75. The Martin Luther King Globex session where the regular markets remained close pushed the SP down closing at 840.00. The real action started on Tuesday, President Obama’s inauguration event resulted in a huge sell off on all the markets. Early news about RBS bailout by the British Government gave reasons for the U.S. bank shares to trade down; Citigroup and Bank of America hit their lowest levels since the early 1990s, also State Street Corp said it needs to raise capital as its shares fell as much as 55 percent in New York Stock Exchange composite trading, wiping out $8.7 billion of market value and dragging the stock market sharply lower. Fiat announced that it will take a 35% stake in Chrysler in exchange for technology and global marketing, 355 for nothing, that just indicates how desperate the situation is for the automakers.
For the first time since November the SP traded at the 800.00 mark. For the day, the SP lost 42.50 points and settled at 806.00, the Nasdaq ended lower by 49.50 points at 1147.50 and the Russell lost 31.00 ending the session at 432.60 The Dow closed below the 8000 mark at 7949 losing 4%, 332 points. Wednesday’s session gave way to a bounce from oversold conditions, the session started with a positive tone, IBM 2009 positive outlook and UTX topping earnings consensus, a bounce in the banking shares, Apple record sales gave investors a bit of confidence. The NAHB housing market index posted a new low while Treasury nominee Geithner pledged aggressive action to get the economy moving. Despite rumors that GE will report an ugly fourth quarter numbers markets closed with strong note. The SP gain 30.75 points ending the session at 836.75, the Nasdaq advanced 34.00 points and settled at 1181.50 and the Russell closed higher by 21.1 points at 453.70.
Thursday’s session showed the fragility of the previous day’s rally, not too much reasons to be a buyer, Initial claims at 589K, Continuing claims reaching 6.4 million and Housing Starts and Building Permits at record lows kept the markets under pressure despite wild intraday reversals, on the corporate area, Microsoft reporting below expectations and ready to cut 5000 jobs, and indications that GE will cut its dividend and may need government assistance gave way to a negative session. The SP lost 11.25 points and closed at 825.50, the Nasdaq lost 9.25 points ending the session at 1172.25 and the Russell closed lower 9.70 points at 444.00. The Dow lost 105 points closing at 8122.
FRIDAY’S MARKETSFriday’s action started during the Globex session, a sharply downside move pushed the SP to 801.25 from where the index bounced to 805.50 before GE earnings were released and once they were announced showing no surprises, the SP continue higher to 811.75 but two hours later was making a low at 799.50. The E-mini SP started the session at 804.25 from where it bounced to 807.50, get sold to 801.50 and rallied to 809.00, all this in the first seven minutes of the session. As the early short covering continued, the SP reached my resistance 811.00 area from where it pulled back to 805.00 and rallied to 813.25 from where it pulled back a few points and then placed a new intraday high at 817.00 where the move stalled. As the index failed to break higher, sellers came in pushing the SP down to 808.00. As our intraday support are held the pullback, the SP pushed up to a new intraday high at 819.50. as the rally continued and the shorts started to cover, the SP reached my pivot 825.25 area from where the index pulled back to 818.50, bounced back to a lower high and sold off to 813.00. After holding our support level, the SP bounced all the way up to the highs, where a triple top gave way to another pullback, this time to 816.00. Unable to push lower the index resumed its uptrend reaching 832.25 and then my upside objective at 836.00 where once more a lower high resulted in some profit taking that pushed the index all the way down to 821.50, bounced back to 827.00, tested the 821.50 level a few times and rallied back to 828.00, pulled back once more and repeated the previous bounce just to get sold into the close. For the day, the SP lost two points and settled at 823.50, the Nasdaq ended lower by 8.00 points at 1164.25 and the Russell lost 4.60 points closing the session at 439.40. The Dow lost 45 points and settled at 8077.
MARKET COMMENTARY AND OUTLOOKWe came into Friday’s session waiting for the possibility of a false break below the 800.00 area on the SP that get reversed resulting in a strong rally, we also recommended to follow the opening price for market direction; we got both, an initial sell off, most of it done during the Globex session resulting in a marginal low below the 800.00 area, and the initial pullback below the 804.50 opening price that lasted less than two minutes and once it get exceeded markets never looked back.
So we are almost as Friday, the strong support seen around the 800.00 level on the SP and 1140.00-1136.00 on the Nasdaq has been able to hold, now, for a fourth consecutive session. The 8,000 on the futures Dow has been rejected a few times, but the cash index has hold above it. Will the indexes continue to build out within the range before making a breakout? Or maybe, they are trading the last sessions building a base for an upcoming rally? Those are the only two probabilities, and both favor the upside unless the strong support areas at the levels I just mentioned get decisively broken.
Friday’s early reversal was done with a lot of short covering and some mild buying activity and the late sell off can be qualified as normal for a Friday as traders do not find a reason to stay long for the weekend. The key, for a resume of a countertrend rally will be to see some follow through during the next two sessions pushing the indexes up for a close above 844.00 on the SP 1210.00 on the NQ and 8300 on the Dow, if that happens, we could be ready for another bear market rally. Obviously a close below the support areas will point to a test of the November lows and maybe more. So at this moment there is more risk taking a short position than a long shot, but I don’t mean by that that the markets have a reason for a sustainable rally, but perhaps, in front of this week FOMC rate decision some short covering could be seen, and if the markets finally move up, then a second degree countertrend, a 7-10 days rally that could find a top before Friday next week when the January unemployment numbers get released, or fail this coming Friday when the GDP preliminary number for the fourth quarter is issued.
On the other side of the coin, markets have not been able to trade above the previous day’s high, and any possible bounce at this moment looks only as short covering as a result of the inability to break the support areas, so breaking below them could result in a fast down move.
Last Friday we recommended to trade using the opening price as a pivot, for today, I will like to see the markets finally trading in positive territory, or holding the first hour lows in order to get long, and of curse, I will be very careful with any new short, the markets is already down seven days and it may be ready for a bounce that finally breaks this lower highs pattern.
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
843.00-844.50
1189.50-1191.00
458.80-459.20
Resistance 3
838.00-839.00
1178.00-1180.00
450.60-452.40
Resistance 2
831.50-833.00
1173.00-1174.00
445.10-446.00
Resistance 1
826.75-828.50
1167.50-1169.00
441.60-442.70
PIVOT
819.75
1165.50
438.10
Support 1
820.00-818.50
1159.75-1157.50
437.20-435.80
Support 2
815.00-813.50
1153.00-1151.50
432.80-432.00
Support 3
810.00-808.50
1145.00-1144.00
429.10-427.80
Support 4
804.50-803.00
1138.50-1136.00
422.80-421.50
S&P
NASDAQ
RUSSELL
FIBONACCI
FIBONACCI
FIBONACCI
895.06
1271.09
487.65
886.44
1259.41
482.05
872.50
1240.50
473.00
858.56
1221.59
463.95
849.94
1209.91
458.35
836.00
1191.00
449.30
822.06
1172.09
440.25
817.75
1166.25
437.45
813.44
1160.41
434.65
799.50
1141.50
425.60
785.56
1122.59
416.55
776.94
1110.91
410.95
763.00
1092.00
401.90
749.06
1073.09
392.85
740.44
1061.41
387.25
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
829.75
1177.50
444.00
AS DAILY LOW
793.25
1128.00
420.70
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.