Good day! After a harsh drop on Tuesday morning to start the shortened trading week, the market spent the remainder of the week trying to recoup the losses. Three days of minor upside finally wiped out Tuesday's retreat, but the week ended relatively unchanged following Labor Day weekend with the Dow Jones Industrial Average up only 0.1%, the S&P 500 up 0.5%, and the Nasdaq Composite up 0.4%. Although it's not an index I typically track in this column, the Russell 2000 was an exception and finished the week lower by 1.1%. Energy stocks were among the top gainers. Crude oil futures ended the week higher by 2.5%.
Dow Jones Industrial Average
Market participation was very light last week. Only 754 million shares exchanged hands on the floor of the NYSE. The Labor Day holiday kicked off the slow week and the Jewish new year brought it to a close. Friday's session was particularly thin compared to the average volume over the course of the year-to-date and this attributed to the type of market action we saw throughout the session.
As anticipated, the market had difficulty establishing strong follow through on the daily time frame. The fact that the market broke through the prior week's highs, but did so following a shift in upside momentum, made it tougher for the bulls to regain a firm grasp on the market bias. Although the predominant trend was still to the upside, that upside remained under pressure.
After an unexciting open on Friday, the market began to attempt to push higher out of the 9:45 ET correction period. Resistance hit by 10:45 ET, however, when the index futures struck an equal move price level on the 5 and 15 minute time frames when the morning move is compared to the one that took place on Thursday afternoon. This is shown in red on the 15 minute charts. The indices rolled over throughout the rest of the morning, but regained a foothold into noon when they pulled into 15 minute 20 period moving average support and the congestion zone from Thursday's closing action. This late-morning correction, however, was stronger than the overall upside pace and it made it difficult for the bulls to assert a great deal of authority. The light volume and lack of leadership in the market throughout the afternoon kept things quiet, but the indices all managed to close near the week's highs.
When all was said and done, the gainers led decliners by 2.1 to 1 on the New York Stock Exchange and 1.3 to 1 on the Nasdaq on Friday.
The Dow Jones Industrial Average ($DJI) posted a gain of 47.53 points, or 0.46%, and closed at 10,462.77 on Friday. 22 of the Dow's 30 index components posted a gain on Friday. The top performers were Chevron Corp. (CVX) (+1.89%), Merck (MRK) (+1.58%), Pfizer (PFE) (+1.31%), IBM (+1.29%), and 3M (MMM) (+1.18%). The two that topped a 1% loss were Hewlett-Packard (HPQ) (-1.39%) and American Express (AXP) (-1.23%).
The S&P 500 ($SPX) rose 5.37 points, or 0.49%, and closed at 1,109.55. Moodys Corp (MCO) (+5.85%), Cameron International Corp. (CAM) (+3.95%), Viacom Inc. (VIA.B) (+3.69%), and JDS Uniphase (JDSU) (+3.60%) led the gainers in the S&P 500 on Friday. The worst performers included PG&E Corp. (PGE) (-8.35%), National Semiconductor Corp. (NSM) (-6.36%), Micron Technology (MU) (-4.26%), and Watson Pharmaceuticals (WPI) (-4.10%).
The Nasdaq Composite ($COMPX) ended the session higher by 6.28 points, or 0.28%, on Friday and it closed at 2,242.48. Nii Holdings (NIHD) (+4.13%) was the top gainer in the Nasdaq-100. It was followed by Oracle (ORCL) (+2.96%), Sears Holdings (SHLD) (+2.91%), and Celgene Corp. (CELG) (+2.89%). On the losing end were Maxim Integrated Products (MXIM) (-3.79%), Microchip Tech. (MCHP) (-3.44%), Sandisk Corp. (SNDK) (-2.66%), and Dell Computers (DELL) (-2.58%). Dell closed lower following a downgrade from "equal-weight" to "underweight" by Morgan Stanley. Cicso (CSCO) also received a downgrade on Friday by RBC Capital to "outperform".
Although this past week was a light one for economic data, things are going to pick up this week. The two main releases in the U.S. will be Tuesday's retail sales for August and Wednesday's industrial production for August. The overall bias in the markets remains a gradual uptrend on the 60 minute charts with the index futures approaching a 15 minute resistance zone heading into the early morning hours on Monday. This is also still the general zone of the 200 day moving average resistance as well.
Note: Unless otherwise stated, the index action described in this article relates to the E-mini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.
Toni Hansen is president and co-founder of the Bastiat Group, Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.