Retail sales support bulls but equities can't hold gains

Retailers Fare Well Following August Sales


Note: The current futures contract for the indices is December: Z01. Sept. charts are being used in some cases to show continuity.

Good day! After a slow week of data, Tuesday's retail sales numbers for August helped provide increased interest in a month marked by light participation. The early morning data showed that the advance retail sales for August were up 0.4%. This was slightly higher than the 0.3% increase analysts had been forecasting. Revisions to the prior month's data, however, dampened the initial enthusiasm and the index futures resumed their gradual premarket downtrend into the opening bell with a final lower low on the 5 minute time frame going into the 9:45 a.m. ET correction period. Many of the individual retailers had stellar performances intraday and the market rallied strongly throughout the morning after it reacted to the support from the lower end of the premarket trading channel. The retail sector as a whole ended the session higher by 1.2%, but many stocks, such as Best Buy (BBY) outperformed that average.

Gold shares were also extremely strong on Tuesday after breaking out of Monday's narrow trading range. Prices hit new all-time highs of $1274.60 an ounce with other previous metals and mining shares following the lead. This caused the greenback to falter.

Dow Jones Industrial Average


The upside throughout the morning was steady in the indices. The strongest portion of the move took place prior to the 11:15 ET correction period and the momentum shifted into noon. The Nasdaq led during that time thanks to strength in technology, particularly Cisco (CSCO), but even it began to roll over during the lunch hour. It triggered a momentum reversal on the 5 minute time frame coming out of the 13:00 ET correction period. that same setup took place slightly earlier in the overall market and is shown in red.

A small downtrend followed the 5 minute momentum reversal with three waves of selling into 14:00 ET. This is another popular turning point for the indices and corresponded to the 15 minute 20 period moving averages in the S&P 500 and Nasdaq 100 futures, along with lower channel support on the intraday time frames (shown on the 15 minute charts). The indices hugged this support zone into the final minutes of trade and broke lower for a second wave of correction off the morning highs heading into the closing bell.

S&P 500


The Dow Jones Industrial Average ($DJI) posted a loss of 17.64 points, or 0.17%, and closed at 10,526.49 on Tuesday. The gainers and losers were fairly evenly matched. Just under half of the Dow's 30 index components posted a gain. Only two posted gains over 1%. They included Hewlett Packard (HPQ) (+2.64%) and Travelers (TRV) (+1.15%). Three posted losses greater than 1%. They were Boeing (BA) (-2.23%), American Express (AXP) (-2.04%), and Bank of America (BAC) (-1.94%).

The S&P 500 ($SPX) fell 0.80 points, or 0.07%, and closed at 1,121.10. The retailers were among the day's best performers. Top gainers in the S&P 500 included JC Penney (JCP) (+7.43%), Best Buy Inc. (BBY) (+6.00%), Corning Inc. (GLW) (+4.76%), and Newmont Mining (NEM) (+4.02%). The biggest losers were Cliffs Natural Resources (CLF) (-6.47%), SLM Corp. (SLM) (-4.95%), and Eastman Kodak (EK) (-3.99%).

The Nasdaq Composite ($COMPX) ended the session higher by 4.06 points, or 4.06%, on Tuesday and it closed at 2,289.77. Hologic Inc. (HOLX) (+4.68%), Altera (ALTR) (+3.75%), and Xilinx Inc. (XLNX) (+3.36%) were the top gainers in the Nasdaq-100. The biggest losers were Comcast Corp. (CMCSA) (-3.42%) and Joy Global (JOYG) (-1.41%).

Nasdaq Composite


The pullback into the closing bell followed through in after hours trade and hit equal move support compared to the mid-day correction, as well as price support from premarket congestion, within an hour. The index futures recovered those losses by midnight, but the momentum remained bearish and the sellers took over in wee hours of the morning. This has created rounded highs on the 30 minute all-sessions time frame going into Wednesday's open, although the trading range at the week's highs has still held.

Although the 60 minute charts have room for another push higher before breaking this month's uptrend, the rounded highs are a plus for the bears. The daily highs this week struck price resistance from the highs of June and August in the S&P 500, which is a strong resistance zone. The rally was on decent momentum, however, and has not lasted as long as the July to August uptrend, so this supports the indices having room to be able to push past that level still this month. As a result, I'm not going to jump too quickly on this shift to favor downside intraday and will go into it as having higher odds of being a minor correction favoring day trade action over swing since it will be more difficult to gain strong multi-day follow-through without a lot of day-to-day overlap at this point.

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.

About the Author
Toni Hansen

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.

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