Good day! The market was virtually unchanged on Monday after a grueling session in which neither the bears nor the bulls were too keen to take the lead. Greece faced yet another downgrade by Standard & Poor's, but this barely fazed the market. Without any other strong economic data to get things moving, the indexes remained "stuck" throughout the first trading day of the new week. The sharp selloff last week, without any rounding off at lows to turn the market higher on anything larger than a five-minute time frame, offered little incentive to get things going from a technical standpoint.
Dow Jones Industrial Average
The Nasdaq-100 did hit and hold its 200-day moving average mid-day, which offered some relief to the selling in the afternoon, but the bulls found it difficult to hold onto any intraday gains on Monday. The session began with a minor upside gap as the indices tested upper resistance levels on a 15 minute time frame on an all-sessions chart. The pace of the buying slowed at that level, however, and created a Momentum Reversal on the 5 minute time frame. This is seen most clearly on the 15 minute chart of the ES (Figure 2) which includes pre-market trade, or the 5 minute chart of the NQ intraday (Figure 3). This short signal took the market lower into the 13:00 ET correction period, which is when the Nasdaq-100 hit its daily support. The indices bounced back sharply to the upper end of the day's range, but once again sold off into the close as it continued to teeter-totter back and forth on the 15 minute charts.
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 1.06 points, or 0.01%, and closed at 11,952.97 on Monday. Nineteen of the Dow's thirty index components posted a gain on the day despite the minuscule size of the overall gain in the index. The top performers were Pfizer (PFE) (+1.74%), Bank of America (BAC) (+1.57%), and JP Morgan Chase (JPM) (+1.51%). The weakest performers weighing on the Dow were Caterpillar (CAT) (-1.39%), Hewlett-Packard (HPQ) (-1.37%), and Alcoa (AA) (-1.18%).
The S&P 500 ($SPX) fractal gain of 0.85 point, or 0.07%, and closed at 1,271.83. VF Corp. (VFC) (+10.03%) was the strongest percentage performer in the S&P 500 on Monday after announcing plans to purchase Timberland. Other top gainers included Sears Holdings Corp. (SHLD) (+5.30%), Citigroup (C) (+3.30%), and First Horizon National (FHN) (+3.02%). The weakest percentage performers were Autonation (AN) (-6.54%), Denbury Res. (DNR) (-4.60%), Nabors Inds. (NBR) (-4.29%), and Alpha Natural Resources (ANR) (-4.18%).
The Nasdaq Composite ($COMPX) ended the session lower with a slight loss of 4.04 points, or 0.15%, on Monday and it closed at 2,639.69. The strongest index components in the Nasdaq-100 ($NDX) were Sears Holdings Corp. (SHLD) (+5.30%), Qiagen (QGEN) (+4.24%), Green Mountain Coffee (GMCR) (+2.65%), and Warner Chilcott (WCRX) (+2.34%). The weakest were Cognizant Technology (CTSH) (-3.14%), Baidu (BIDU) (-3.01%), and Joy Global (JOYG) (-3.01%).
The economic data will start to pick up again on Tuesday with May's retail sales and Producer Price Index prior to the open. April's business inventories follow at 10:00 a.m. ET. There is a slight bullish bias on the 15 minute time frame as Monday evening wraps up, but it still wouldn't take a lot to push both the S&P 500 and Dow Jones Ind. Average into their own 200-day moving averages this week. I prefer to rely on the smaller time frames intraday at this point, particularly on the short side, but am starting to watch for reversal patterns on the daily charts for 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.