TradeStalker's RBI 07/31/05

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TradeStalker's

R.B.I. Trader's Update

07 / 31 / 2005

(Published Since 1996)

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Dateline: 7:54 pm eastern time, 07/31/2005


The early pop to the 1248.00 resistance level on the SP
futures and 1626.50 level on the Nasdaq futures was quickly
sold on Friday, and the market chopped steadily lower in to
noon. After trying to get a rally going just after lunch
time, this time the bounce didn't stick.

The cash indices closed on their lows for the day, while the
futures bounced back in the last 20 minutes. However, with
the goofy "end of month settlement at fair value" policy,
the SP and Nasdaq futures actually "settled" just 1 tick off
of the lows on Friday. (For more info on this see
http://www.cme.com/trading/prd/equity/fairvaluefaq2544.html
). To get to where the last trade took place on Friday, the
SP futures need to open up 2.75 points and the Nasdaq
futures need to open up 4 points.

So far the action is yet ANOTHER fake-out breakout. The
market was up all week, then in one day gave back all of its
gains. The SP500 popped out of the top of a rising wedge
pattern on the daily chart, then got pulled right back in to
the week's trading range.

Contrary to what some pundits will tell you, steady "drip,
drip, drip" type of moves higher tend to be a lot LESS
sustainable, as the volatility contraction usually leads to
complacency. When the "group think" gets shaken, and bids
dry up and the ultimate sell off occurs. The highs become lids
until the market regroups. Since the "tree has been shaken",
the bulls and bears will likely do battle until a new "group
think" stage sets in.

It's doubtful that the market is going to go down easily.
What we are likely going to see is a volatile trading range
for a bit. There should be decent moves in both directions
while the market sorts out last week's action. So, try to
only get involved at extremes in this environment. The short
side on the emotional run up's that fizzle should offer the
better setups for now. On the flip side, a lower open that
reverses on Monday should offer a good trade on the long
side.

There is initial resistance up at the 1242.50-1243.75 area
on the SP futures and 1619-1621 area on the Nasdaq futures.
Those areas were trouble on Friday afternoon. So, if the
market pushes through and holds those areas without a
problem, then we could rally back to test the 1247.50-
1248.00 and 1626.50-1627.50 areas.

The initial support is at the 1237.00-1236.50 area on the SP
futures and 1611.50-1611.00 area on the Nasdaq futures. If
broken by much, then the 1232.25-1230.75 and 1603-1602 zones
are next. If the market fails to turn around from down here,
then the 1228.25-1227.50 and 1598.50-1597.50 zones appear to
be huge. If those areas are reached, and the market doesn't
make a quick U-Turn higher, then the 1220 level on the SP500
cash might be a magnet before the market is in a good spot
for a rally.



September 2005 SP futures resistance
symbols: emini = esu5 / big contract =SPu5

1242.50-1243.75
1247.50-1248.00


September 2005 SP futures support
symbols: emini = esu5 / big contract =SPu5

1237.00-1236.50
1232.25-1230.75
1228.25-1227.50


September 2005 Nasdaq futures resistance
symbols: emini = nqu5 / big contract = ndu5

1619-1621
1626.50-1627.50


September 2005 Nasdaq futures support
symbols: emini = nqu5 / big contract = ndu5

1611.50-1611.00
1603-1602
1598.50-1597.50


September 2005 Dow futures resistance
symbols: emini = ymu5

10698-10708
10727-10734


September 2005 Dow futures support
symbols: emini = ymu5

10652-10647
10616-10601
10588-10579

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Good Trading,
Mike Reed


Copyright (c) 2005 by TradeStalker.com, Abilene, TX.
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Disclaimer

The financial markets are risky. Investing is risky.
Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy
or sell any security. Opinions are based on historical
research and data believed reliable, but there is no
guarantee that future results will be profitable.

We are not advocating trading futures. The prices and
contracts in the TradeStalker Updates Specify a manner
in which you could trade. We occasionally mention the
SP500 and Nasdaq futures markets because it is
extremely liquid and tends to lead the other markets.
This is not an endorsement or recommendation of the SP 500
and Nasdaq futures markets. The risk of loss in futures
is substantial. You can lose more than your original
investment. We are not Registered Investment Advisors or
Commodity Trading Advisors.
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