Good day! The market didn't offer up a lot for surprises on Tuesday after Monday's strong reversal. The price action intraday was exactly in line with expectations heading into the session. On Monday we had witnessed sharp selling in the morning with the pace abating as the day wore on. This shift in momentum continued into Tuesday's session as well, creating a lot of back and forth action on the 15-minute time frame and was favorable for day traders as anticipated, but did little to advance the previous day's trend. This type of trade is continuing into Wednesday's session as well.
As I mentioned for yesterday's session, as this congestion on the 15-minute charts continues, the momentum of the smaller price shifts within the congestion will play a large role in the overall direction of the day's action. Right now the indices are rounding off at lows, which is favorable for the bulls, but it's simply too early to tell if this will hold true since more gradual downside within the congestion is still needed for further confirmation.
Dow Jones Industrial Average
The data on Tuesday had little impact upon the day's price action. According to the Commerce Department, factory orders rose by 3% in March, which was higher than the 2.5% analysts had anticipated. The indices were already on the move higher heading into this data and found themselves at resistance as the news settled in. Nevertheless, the corrective move was mild and followed by further upside into noon before turning once again.
Wednesday's reaction to morning data was also mild. The ADP National Employment Index showed that the private sector created 179,000 jobs last month, but this was less than half what had been anticipated. Friday's employment report will be much more widely followed, however, and likely to generate a much stronger reaction. Prior to that, the Labor Department will release last week's jobless claims on Thursday.
The Dow Jones Industrial Average ($DJI) ended the day a fractional gain of 0.15 points, or 0.0%, and closed at 12,807.51 on Tuesday. Although the Dow was only up slightly for the day, two-thirds of its index components posted a gain. The top performers were Alcoa (AA) (+2.61%), Bank of America (BAC) (+2.11%), AT&T (T) (+2.08%), and JP Morgan Chase (JPM) (+1.64%). The biggest drag on the Dow was Pfizer (PFE) (-2.76%) after it reported earnings a penny a share above estimates. Chevron (CVX) followed with a loss of 1.86%, while Exxon Mobil (XOM) fell 1.55%. These were weighed down by declining oil prices.
Oil was down 2.2% to $111.05 a barrel on Tuesday. The pattern created a nice 2T reversal on the daily time frame. Two of my favorite oil ETFs are USO and OIL and both triggered 15 minute Avalanche short setups intraday on Monday and continued strongly on Tuesday.
The S&P 500 ($SPX) fell 4.6 points, or 0.34%, and closed at 1,356.62. The strongest percentage performer in the index was MetroPCS Communications (PCS) (+10.13%). FirstEnergy Corp. (FE) (+6.06%), Avon Products (AVP) (+4.53%), Macys (M) (+3.13%), and First Horizon Natl. Corp. (FHN) (+3.13%) rounded off the gainer's list. Computer Sciences Corp. (CSC) was the weakest performer in the index. It fell 12.90%). Other top decliners included Sears Holdings Corp. (SHLD) (-9.86%), Archer Daniels Midland (ADM) (-6.73%), Emerson Elec. Co. (EMR) (-6.45%), and Molson Coors Brewing Co. (TAP) (-5.95%).
The Nasdaq Composite ($COMPX) ended the session lower by 22.46 points, or 0.78%, on Tuesday and it closed at 2,841.62. The top gainers in the Nasdaq-100 were Gilead Sciences Inc. (GILD) (+2.43%), Dell Computers (DELL) (+2.33%), NII Holdings (NIHD) (+1.65%), and Intel (INTC) (+1.40%). The weakest were Sears Holdings (SHLD) (-9.86%), Cognizant Technology Solutions (CTSH) (-5.70%), Baidu (BIDU) (-5.17%), and NVIDIA (NVDA) (-4.76%).
Some of the major earnings reports to keep an eye on this week are Kellogg (K), News Corp. (NWSA), and Transocean (RIG) on Wednesday; Kraft Foods (KFT) and Sara Lee (SLE) on Thursday; and Washington Post (WPO) and Weight Watchers (WTW) 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.