Good day! Ever since I offered up a sell signal on gold at the beginning of December we've been seeing this commodity struggle. Despite an attempt later that month to retest those highs, the gold bulls have failed to keep the momentum going and this month has seen the commodity not only break the 50-day moving average that had held it since August, but the 100-day sma as well. That selloff increased on Thursday with the downside momentum gaining and the commodity ending the session at lows.
By the close of the Comex division on the New York Mercantile Exchange gold for February delivery had fallen $14.60 an ounce and settled at $1,318.40. Back in December it had reached a high of $1,434 an ounce.
Furthermore, the selloff doesn't appear to be over. In addition to breaking strong daily support levels, gold is testing the lower end of its weekly uptrend channel and has already busted the 20-week sma that has held since the start of 2009. While we'll certainly see some intraday corrections on the upside, continue to use caution. For those tracking the short side: Very nice job and watch for the 200-day moving average as the next level of upcoming support.
Dow Jones Industrial Average
Oil is another commodity we've seen a lot of struggle in. I started watching this once back in mid-2010 for further selling, but the price action remained mixed and stuck in a gradual uptrend since May. Since the middle of this month, however, we've started to see more of that underlying weakness come to the surface. Oil struggled 8-month highs throughout the second half of December and into January before finally breaking down sharply on January 20th. This recent bout of selling took oil to its 100-day and 200-day moving average zone, which it's testing this week. The current price action suggests that further selling over the next several months is a strong probability. Watch for a few weeks of reaction off support levels, but this should just offer another sell opportunity for swingtraders.
The price action for the overall market this week has been very choppy following Wednesday's FOMC announcement. Despite a slow trend to the upside and even higher highs on the year for the Dow Jones Ind. Ave. and S&P 500, the market has struggled. We've seen a lot of intraday back-and-forth and even a lack of decent intraday swings over the past two days. This should widen up here into next week, but the bulls are definitely fighting to hang on and simply aren't willing to give up the reins just yet.
S&P 500
Even though the overall market has been a mess, earnings seasons has assured day traders of ample opportunities elsewhere. This is making individual stocks preferred over the index futures as the place to be recently. Amazon.com (AMZN) was one of the big ones to release on Thursday evening. It missed revenue expectations and was down sharply afterhours. A great way to help narrow down the field is to check for the premarket gainers and losers, focusing upon the ones whose gaps are less than twice an average day's range. These will often have strong intraday trend moves and give you a short, but accurate focus list to kick off the day.
In other news on Thursday, the economic data was as mixed as the market. December's durable goods orders fell 2.5%. Initial jobless claims for last week hit a three-month high of 454,000... higher than anticipated. Continuing claims were up from 3.9 million to 3.99 million. Pending home sales, however, rose 2.0% when a decline of 0.5% had been expected.
Nasdaq 100
The Dow Jones Industrial Average ($DJI) had a gain of 4.39 points, or 0.04%, and closed at 11,989.83 on Thursday. Two-thirds of the Dow's thirty index components posted a gain on the session. The top performers were General Electric (GE) (+1.81%), Home Depot (HD) (+1.50%), United Technologies (UTX) (+1.45%), and Caterpillar (CAT) (+0.92%). The weakest performer was Procter & Gamble (PG). It fell 2.92%. It was followed by losses in AT&T (T) (-2.09%), Kraft Foods (KFT) (-1.58%), and McDonalds (MCD) (-1.09%).
The S&P 500 ($SPX) rose 2.91 points or 0.22%, and closed at 1,299.54. Netflix (NFLX) broke to new highs following earnings with a gain of 15.21%. Teradyne Inc. (TER) also posted double digit gains, popping 11.76% out of a multi-month trading range. Helmerich & Payne (HP) (+9.52%) and Stanley Black & Decker (SWK) rounded off the top four. The weakest performer in the S&P 500 on Thursday was Motorola Mobility Holdings (MMI) (-12.40%). Murphy Oil (MUR) (-10.23%), Robert Half Intl. (RHI) (-6.32%), and Consol Energy (-5.96%) were the other top percentage decliners.
The Nasdaq Composite ($COMPX) ended the session higher by 15.78 points, or 0.58%, on Thursday and it closed at 2,755.28. Netflix (NFLX) (+15.21%) was also the Nasdaq-100's top gainer. It was followed by Micron Technology (MU) (+6.43%), Qualcomm Inc. (QCOM) (+5.86%), and Amazon.com (AMZN) (+5.17%). Lam Research (LRCX) (-4.18%), Ctrip.com (CTRP) (-3.10%), Dell Inc. (DELL) (-2.40%), and Celgene Corp. (CELG) (-2.38%) were the Nasdaq-100's biggest percentage losers.
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.
