The pace of the afternoon reversal was gradual to begin with compared to what was yet to come, but on the 15 minute charts the indices created a solid inverted -V at highs. Initial support at the 15 minute 20 period moving average held for about an hour before giving way with a strong Avalanche short. The light volume during the congestion along the moving average lent favor to this selloff. Within half an hour the indices had reclaimed most of the day's gains in the S&P and Dow and all of it in the Nasdaq. Earlier congestion in the Nasdaq from Thursday and the 15 minute 200 sma in the S&P and Dow futures held at 15:15 ET and the indices slowly bounced into the closing bell.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) had a gain of 56.99 points, or 0.46%, and closed at 12,376.72 on Friday. Twenty-three of the Dow's thirty index components posted a gain for the day. The top performers were Caterpillar (CAT) (+1.59%), General Electric (GE) (+1.45%), Home Depot (HD) (+1.35%), and Coca-Cola (KO) (+1.33%). The only two to post a loss greater than 1% were Intel (INTC) (-2.28%), and Alcoa (AA) (-1.08%).
The S&P 500 ($SPX) rose 6.58 points, or 0.5%, and closed at 1,332.41. NYSE Euronext (NYX) (+12.60%) was the strongest percentage performer. Nasdaq OMX (NDAQ) (+9.25%) also performed strongly. These two brokerage powerhouses were up following an offer by Nasdaq OMX (NADQ) and IntercontinentalExchange (ICE) for NYSE Euronext (NYX), which has been in the middle of deal-making for a buyout by Germany's Deutsche Bank. Additional top performers included Wynn Resorts (WYNN) (+4.60%) and H&R Block (HRB) (+4.18%). The weakest performers were F5 Networks (FFIV) (-8.78%), JDS Uniphase (JDSU) (-8.30%), Amphenol Corp. (APH) (-3.64%), and Intercontinental Exchange (ICE) (-3.07%).
The Nasdaq Composite ($COMPX) ended the session higher by 8.53 points, or 0.31%, on Friday and it closed at 2,789.60. The top performers in the Nasdaq-100 were Wynn Resorts (WYNN) (+4.60%), Seagate Technologies (STX) (+3.75%), Intuitive Surgical (ISRG) (+3.41%), and Staples Inc. (SPLS) (+3.30%). The weakest were F5 Networks (FFIV) (-8.78%), Altera Corp. (ALTR) (-3.07%), Flextronics Intl. (FLEX) (-2.95%), and Broadcom Corp. (BRCM) (-2.59%).
This will be a light week for both economic and earnings data. Earnings season unofficially kicks off on April 11th with Alcoa's (AA) first quarter report. In the meantime, attention will be focused on the European Central Bank, which is expected to raise its benchmark interest rate from 1% to 1.25% to combat rising inflation. The U.S. Federal Reserve could easily take this cue to begin raising rates before the end of the year as well. The next FOMC meeting will be held April 26-27th.
The market remains extended on the upside heading into this week, which will put pressure on the bulls. Entering new swingtrade positions, particularly on the upside, at this point will be higher risk. I'll be scanning for securities that are showing relative weakness over the past week with strong daily resistance for reversals as swingtrades on the short side as the week progresses and stick primarily to a daytrade focus for any buy setups.
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.