Good day! The market finally broke a six-week losing streak for the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) last week, but the victory was in name only and the gains were measly. The one sure thing was that it was clear that investors weren't at all sure exactly what stance to take for the week. June has been plagued by a sharp selloff to continue the reversal that began at the start of May, but this selloff left the indices feeling exhausted heading into the week. The result was a great deal of overlap in price action from one day to the next throughout the week as anticipated with the bears continuing to push prices towards the 200-day moving averages. The leadership in the selloff has been in the Nasdaq with particular weakness in technology shares.
We've yet to see decent reversal strategies begin to form on the daily charts despite the slowing pace of the selloff, so my outlook for this week remains similar to last: I'll continue to focus on the smaller, intraday charts for trade setups, while continuing to watch for reversal strategies to begin to develop. These will most likely be in the form of Momentum ReversalsTM or Reverse Head & Shoulders on the 120 minute charts.
For the most part, the intraday bias has remained in the bears' favor, but we are seeing a shift heading into Monday morning to suggest some relief to that pressure in morning trade. Nevertheless, the 60-minute charts are still favoring slower overall corrections on the upside, which keeps pressure on the bulls and favors daytrade action versus multi-day follow-through.
Dow Jones Industrial Average
FRIDAY'S MARKET WRAP-UP
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 42.84 points, or 0.36%, and closed at 12,004.36 on Friday. the majority of the Dow's thirty index components finished the session in positive territory. The leaders were Microsoft (MSFT) (+1.13%), AT&T (T) (+1.12%), JP Morgan Chase (JPM) (+1.09%), and IBM (IBM) (+1.09%). The weakest performers were Intel (INTC) (-1.07%), Cisco Systems (CSCO) (-0.53%), and Alcoa (AA) (-0.47%). The Dow ended the week higher by 0.44%, but is down 4.5% month-to-date.
The S&P 500 ($SPX) fractal gain of 3.86 points, or 0.3%, and closed at 1,271.50. The top percentage leaders in the index on Friday were Scripps Networks (SBG) (+5.89%), CB Richard Ellis Group (+CBG) (+4.67%), Flowserve Corp. (FLS) (+4.55%), and Autonation (AN) (+4.55%). The weakest were Moodys (MCO) (-5.02%), CF Inds. Holdings (CF) (-4.45%), Nabors Industries (NBR) (-3.69%), and McGraw Hill (MHP) (-3.58%). The S&P 500 ended the week up fractionally by 0.3%, but remains down 5.49% this month.
The Nasdaq Composite ($COMPX) ended the session lower with a loss of 7.22 points, or 0.28%, on Friday and it closed at 2,616.48. The strongest index components in the Nasdaq-100 ($NDX) were Sears Holdings Corp. (SHLD) (+3.73%), Paccar Inc. (PCAR) (+3.36%), Cognizant Tech. (CTSH) (+3.22%), and First Solar (FSLR) (+2.29%). Research In Motion (RIMM) plunged 21.45% after.... to make it the weakest index component in the Nasdaq-100. It was followed by losses in Flextronics (FLEX) (-4.39%), and Marvell Technology (MRVL) (-4.21%). The Nasdaq Composite ($COMPX) was down 1.03% for the week and is down 7.72% so far this month.
Research In Motion (RIMM) has been suffering a great deal over the past several years and turned lower once again in mid-February. It's latest plunge (in a series of sharp daily declines to occur this year) followed revenue news that fell below its own forecast. After lowering its outlook for the year, analysts at more than a dozen brokerages cut their price targets, while many others lowered their ratings on the company.
In economic news, the Conference Board announced on Friday that leading indicators rose more than anticipated in May to hit record highs. According to the Reuters/University of Michigan consumer confidence survey, however, consumer sentiment worsened by more than expected in June.
The economic data will be light to kick off the new week, but focus will then shift to housing and this week's FOMC interest rate announcement. Existing home sales kick off the reports on Tuesday, while the FOMC news follows 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.