E-mini futures get optimism from strong earnings

After turning higher into Friday's opening bell, the rally continued throughout the remainder of the session. The 5 minute, 20 period moving average served as support and new highs were once again established for the year. The rally pushed to mimic the move off Tuesday's lows into Wednesday morning highs. After testing that level shortly after futures trading resumed on Sunday evening, another correction began that remains in play heading into Monday evening in the index futures. Most of the correction is through time rather than price, keeping the bull's hopes alive into Tuesday morning.

As I mentioned last week, however, it's precarious ground to stand on. The indices continue to hold their 10 and 20-day moving averages and for the S&P 500 its been over a month since its 10-day moving average has broken. Although the market is due for a break, tread gingerly to begin with until the pace of the buying shifts intraday.

Nasdaq Composite (Figure 3)

The Dow Jones Industrial Average ($DJI) had a gain of 55.48 points, or 0.47%, and closed at 11,787.38 on Friday. Financials were amongst the strongest performers for the session. Bank of America (BAC) ended the day higher by 3.25%, while American Express climbed 2.64%. McDonald (MCD) (+1.91%) and DuPont (DD) (+1.76%) followed. Merck (MRK) was the weakest performing, adding another 1.33% to Thursday's losses. Intel (INTC) (-0.99%) and Verizon (VZ) (-0.95%) rounded off the top three decliners. The Dow ended the week higher by 0.96%.

The S&P 500 ($SPX) rose 9.48 points or 0.74%, and closed at 1,293.24. Novellus Systems (NVLS) (+12.31%) was the strongest performer on Friday, benefiting from Intel's (INTC) plans to boost capital spending. Applied Material (AMAT) followed with a gain of 7.58% and Altera (ALTR) rose 6.41%. American International Group (AIG) was the top decliner. It fell another 5.58% on Friday after triggering a 2T reversal off the year's highs on Monday. After recapitalization, the government was left with a 92% stake in the company. Consol Energy (CNX) followed with a loss of 4.29%, while Massey Energy Co. (MEE) fell off its 2-year high with a loss of 3.55% for the day. The S&P 500 ended the week higher by 1.71%.

The Nasdaq Composite ($COMPX) ended the session higher by 20.01 points, or 0.73%, on Friday and it closed at 2,755.30. KLA-Tencor (KLAC) (+5.94%) followed Applied Materials (AMAT) and Altera (ALTR) at the top of the Nasdaq-100 gainers list. The weakest shares in the Nasdaq-100 were Ctrip.com (CTRP) (-2.41%), Activision Blizzard (ATVI) (-2.33%), and Infosys Technologies (INFY) (-1.55%). The Nasdaq Composite ended the week higher by 1.93%.

Gold continued to retreat into the weekend. The reversal strategy I wrote about in early December continued to weigh on the commodity over the course of the past month. If offered a stronger confirmation as the New Year kicked off by cleanly breaking the 50-day moving average support that had held since August. The next hurdle is the 20-week moving average. This zone has held since late-2008, but appears ready to finally give way once again. Gold closed at $1,360.50 an ounce 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.

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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