Good day! My outlook for the week remains unchanged from this weekend. Following last week's gains, it was little surprise that we saw things slow down as the week kicked off. The index futures were trading off premarket highs following gains into the early-morning hours and continued to sell off into 11:15 a.m. ET, but the move was narrow intraday and the intraday trading range narrowed even further after noon.
As I mentioned in yesterday's column, it will be difficult for the bears to regain the upper hand on the daily time frame very quickly, but the bulls will find the path more difficult as well. Securities focused on earnings and other news, as well as those in the same sector, will garner the most interest.
Dow Jones Industrial Average (Figure 1)
The earnings news afterhours on Monday failed to reignite the bulls. Netflix (NFLX) shares were down over 4% following news that the company's earnings guidance for next quarter is weaker than previously anticipated. The index futures were up slightly afterhours on a continuation of the morning reversal, but fell back quickly as the evening wore on. By 1:00 a.m. ET on Tuesday morning they were back at the zone of Monday's morning lows.
Ahead of Tuesday's open, watch for earnings from Delta (DAL), Ford (F), Coca-Cola (KO), and 3M (MMM). The Case-Shiller 20-city home price index is also due out ahead of the open. Prices are expected to have fallen 3.2% in February following a 3.1% decline in January. Amazon.com (AMZN) reports after the closing bell.
The market will also be looking ahead to Wednesday's meeting announcement by the Federal Open Market Committee regarding their latest stance on interest rates. This two-day meeting begins on Tuesday with the announcement due out on Wednesday afternoon.
S&P 500 (Figure 2)
It is common for the market to slow the day before a Fed meeting kicks off. Recently, however, the actual announcement has not had as much of an impact on market price action as it has had in the years past. We will likely see this start to change once again towards the end of the year, but the reaction should remain relatively muted this month. An exception could be made, however, if the market continues to chop around without strong intraday swings on Tuesday and into Wednesday morning. This type of congestive action will make it more conducive to rapid price swings with any news.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) ended the day a loss of 26.11 points, or 0.21%, and closed at 12,479.88 on Monday. Twelve of the Dow's thirty index components posted a gain. The top performers were Intel (INTC) (+2.24%), Pfizer (PFE) (+1.77%), and Bank of America (BAC) (+1.06%). The weakest were DuPont (DD) (-1.41%), Hewlett-Packard (HPQ) (-1.12%), and Kraft Foods (KFT) (-0.93%).
The S&P 500 ($SPX) fell 2.13 points, or 0.16%, and closed at 1,335.25. The strongest performers in the index were International Game Technology (IGT) (+9.25%), Lexmark Intl. (LXK) (+3.71%), eBay (EBAY) (+3.16%), and Hasbro (HAS) (+2.45%). The weakest were Motorola Mobility (MMI) (-3.97%), CB Richard Ellis Group (CBG) (-3.80%), Johnson Ctls (JCI) (-2.77%), and Kimberly Clark (KMB) (-2.74%).
The Nasdaq Composite ($COMPX) ended the session higher by 5.72 points, or 0.2%, on Monday and it closed at 2,825.88. The strongest performers in the Nasdaq-100 were eBay (EBAY) (+3.16%), Expedia (EXPE) (+2.27%), Intel (INTC) (+2.24%), and Baidu (BIDU) (+2.23%). The weakest were Alexion Pharmaceuticals (ALXN) (-4.17%), Vertex Pharmaceuticals (VRTX) (-2.69%), Ctrip.com (CTRP) (-2.64%), and Warner Chilcott (WCRX) (-2.11%).
Gold and silver were both higher once again on Monday. Gold settled at an all-time closing high of $1,509.10 an ounce with an intraday high of $1,518. Due to the price development on the daily and 60-minute time frames, gold in particular will be highly susceptible to rapid intraday selloffs over the next several days. Silver settled at $47.149 an ounce on Monday, just shy of the 1980 closing high of $49.35 an ounce in London. Silver hit an intraday high of $49.82 on Monday. The 1980 intraday high was $50.35 an ounce. As the commodity pushes into this level, the resistance is evident on the daily charts. SLV is the iShares tracking stock and volume soared on Monday with SLV gapping up to open at highs before falling sharply throughout the morning and then recovering about half of the losses mid-day. This was the first time it closed lower than it opened in 8 trading sessions, although it still posted a gain for the day.
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.