Good day! Friday's jobs data disappointed market participants on Friday. According to the Labor Department, nonfarm payrolls increased by only 103,000 in December. Analysts had been expecting an increase of 150,000-175,000 jobs. Private sector jobs rose 113,000, but this was substantially less than payroll processor ADP's report on Wednesday that indicated 297,000 private sector jobs had been created last month.
Dow Jones Industrial Average (Figure 1)
On the bright side, the unemployment rate fell from 9.8% to 9.4%, which is the lowest it's been in over a year and a half. Nevertheless, this surprise was not enough to continue to entice the bulls. The major indices have been holding above their 20-day moving averages since the beginning of December, but Friday brought another retest of that support zone and it did so on strong volume compared to the the average of the past month. Not even optimistic comments by Fed Chairman Ben Bernanke managed to lift the market's spirits. Bernanke told the Senate Banking Committee that the pace of the recovery is expected to increase "moderately" in 2011.
The index futures traded in a channel on the all-sessions charts from the highs prior to the morning data to the lows that followed. The momentum within that range continued to shift on the 5 minute charts along with the 60-minute ones and a larger short setup triggered following the third high at 10:30 a.m. ET. This move broke through morning lows and the new downtrend continued into nearly 13:00 ET when both the Dow Jones Ind. Ave. and S&P 500 retested Tuesday's lows. The indices recovered throughout the remainder of the afternoon, but the pace slowed in the final two hours and remained slower overall than the morning selloff. This continued the bearish bias heading into Sunday evening when the index futures began trading once again.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) had a loss of 22.55 points, or 0.19%, and closed at 11,674.76 on Friday. Twelve of the Dow's thirty index components posted a gain on Friday. The top performers were Pfizer (PFE) (+0.88%), Boeing (BA) (+0.84%), Merck (MRK) (+0.78%), and Chevron (CVX) (+0.55%). The weakest performers were Travelers (TRV) (-1.95%), JP Morgan Chase (JPM) (-1.89%), Bank of America (BAC) (-1.32%), and AT&T (T) (-1.03%). The banks dragged down the index after a Massachusetts' court ruled against Wells Fargo (WFC) and US Bancorp (USB) in a foreclosure case. The Dow ended the week higher by 0.84%.
Nasdaq Composite (Figure 3)
The S&P 500 ($SPX) fell 2.35 points or 0.18%, and closed at 1,271.50. Dean Foods (DF) (+11.25%) was the top percentage performer in the S&P 500 on Friday after the hedge fund Appaloosa Management disclosed a 7.35% interest in the company. It was followed by gains in L-3 Communications (LLL) (+5.67%), Goodyear Tire (GT) (+5.13%), and Diamond Offshore (DO) (+4.87%). AK Steel Holding Corp. (AKS) (-7.41%) was the weakest performer in the S&P 500. It was followed by losses in Supervalu (SVU) (-5.87%), United States Steel (X) (-4.94%), Lorillard Inc. (LO) (-4.56%), and JC Penney (JCP) (-4.18%). The S&P 500 ended the week higher by 1.1%.
The Nasdaq Composite ($COMPX) ended the session lower by 6.72 points, or 0.25%, on Friday and it closed at 2,703.17. The strongest stocks in the Nasdaq-100 were Wynn Resorts (WYNN) (+3.54%), NVIDIA (NVDA) (+2.79%), Starbucks (SBUX) (+2.57%), Marvell Technology Group (MRVL) (+2.45%). The weakest were Apollo Group (APOL) (-3.78%), Virgin Media (VMED) (-3.28%), Mattel Inc. (MAT) (-2.70%), and eBay (EBAY) (-2.57%). The Nasdaq-100 ended the week higher by 1.9%.
Keep a "heads-up" this week, because earning season unofficially kicks off on Monday with Alcoa (AA). Some names to watch are Alcoa (AA) and Apollo Group (APOL), which report after the close on Monday, Intel (INTC) reports on Thursday, and JP Morgan Chase (JPM) reports on Friday.
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.