Good day! It's been a very rough week for commodities, but the exhaustion move I wrote about in Thursday evening's column held prices into the weekend, creating a narrower session as the panic abated (at least temporarily) into the weekend. Silver was particularly hard-hit last week. As those of you who have been reading me for some time have seen, I've been cautious on silver over the past several weeks, but the catalyst for a larger correction came on the heels of an increase in reserve requirements across a number of major exchanges that went into affect following Friday's close a week ago on May 29. Silver is down 27.39% so far this month at $35.287 an ounce as of Friday's close. Gold, which also took a beating last week, is down 4.16% this month to $1,491.60 on Friday.
Dow Jones Industrial Average
Oil took a dive with the precious metals. It had also been showing signs of exhaustion with the daily pace shifting at highs heading into last week whereby it was having a more difficult time making new highs and was experiencing a great deal of price overlap from one day to the next. This is one of the things I always look for as an indication that a corrective move is on the horizon and we saw this take place in gold last month as well. Crude oil ended last week under the $100 a barrel level once again at $97.18 with a loss of 14.70% so far this month. We can easily see it continue to slip this week into 200 day moving averages.
The trend action in all of the strongly-moving commodities from last week can expect to slow in the week ahead with greater chop once again from day to day. The added volatility in this market will keep it active, but the best time frames for trading it at present will be intraday using 5-15 minute time frames for pattern development.
Friday's big news, of course, was the latest jobs data. The Labor Department surprised investors when it reported that payrolls were up 244,000 in April. The national unemployment rate ticked higher to 9%. The market continued to build upon the premarket gains throughout the morning, but the pace of the buying diminished. A comparison of a daily chart in oil and the 5 minute chart of the Dow on Friday morning reveal a great deal of similarities. A series of three slightly higher high with greater price overlap led to sharp selling. This selloff began with the 12:00 ET correction period intraday on Friday in the indices and the market remained weak throughout the rest of the session.
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 54.57 points, or 0.43%, and closed at 12,638.74 on Friday. Twenty-five of the Dow's thirty index components posted a gain. The top performers were Kraft Foods (KFT) (+2.07%), DuPont (DD) (+1.41%), American Express (AXP) (+1.37%), and Boeing (BA) (+1.10%). The weakest performers were Intel (INTC) (-1.52%), Procter & Gamble (PG) (-0.93%), and JP Morgan Chase (JPM) (-0.29%). The Dow ended the week lower by 1.34%.
The S&P 500 ($SPX) rose 5.10 points, or 0.38%, and closed at 1,340.20. The strongest percentage performers in the index were Fluor Corp. (FLR) (+7.89%), CF Industries Holdings (CF) (+6.63%), NVIDIA Corp. (NVDA) (+3.54%), and Netapp Inc. (NTAP) (+3.50%). The weakest were Carmax Inc. (KMX) (-6.03%), Washington Post Co. (WPO) (-4.70%), Priceline.com (PCLN) (-2.80%), and MetroPCS Communications (PCS) (-2.20%). The S&P 500 ended the week lower by 1.72%.
The Nasdaq Composite ($COMPX) ended the session higher by 12.84 points, or 0.46%, on Friday and it closed at 2,827.56. The top percentage performers in the Nasdaq-100 were Warner Chilcott (WCRX) (+5.90%), Liberty Media Corp. (LINTA) (+4.62%), NVIDIA Corp. (NVDA) (+3.54%), and Netapp Inc. (NTAP) (+3.50%). Priceline.com (PCLN) (-2.80%), Research In Motion (RIMM) (-2.75%), Akamai Technologies (AKAM) (-1.56%), and Intel (INTC) (-1.52%). The Nasdaq Composite ended the week lower by 1.60%.
Earnings season remains in full swing this week, so be sure to check the latest updates every morning before initiating multi-day holds and keep an eye on the earnings dates for positions already open, since dramatic price swings can easily occur following the release. Earnings also offer great opportunities for momentum plays, so a quick look at the premarket gainers and losers this time of the year can generate a nice list of actionable plays to kick off your morning.
This week will have a slow start for economic data, however, with no major releases on Monday. Import and export prices and wholesale inventories are due out on Tuesday, while March's U.S. trade balance comes out on Wednesday.
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.