FRIDAY'S MARKET WRAP-UP
Good day! Worry. Worry. Concern. Worry. These words keep popping up when you are reading the latest articles on the state of the economy throughout the U.S. and Europe these days. Towards the end of last week most of the focus was once again upon Greece and then Italy. On Thursday Greece's five-year austerity plan was approved by a team of European Union and International Monetary Fund inspectors and the market welcomed the news, but the tide turned overnight.
Moody's warned of a downgrade on Italian banks on Thursday, showing that the European debt crisis is far from slowing. Deutsche Bank also kept the pressure on the financials after it cut second-quarter earnings estimates for both Goldman Sachs (GS) and Morgan Stanley (MS).
Dow Jones Industrial Average (Figure 1)
Although the market had been up earlier in premarket trade, by the time the opening bell rang the index futures were slightly lower. The morning push on the upside followed sliver of good economic data stateside. Durable goods orders were up 1.9% in may and the Commerce Department upwardly revised its estimate for anticipated economic growth to a rate of 1.9% for the first quarter. The larger technical pressure for a move to the downside following a 15 minute Momentum Reversal afterhours, however, weighed heavily on the market and the indices turned lower into the open.
The selling continued throughout the session, although at a more moderate pace after 10:30 a.m. ET. The downtrend continued on the 15 minute time frame, but each wave of selling was substantially slower than the first. This created the start of another potential Momentum Reversal as a buy strategy heading into Friday's closing bell since each slightly lower low created a type of bear trap. The time development for the slowing pace, however was not as long as the premarket Momentum Reversal had been and the support into the closing bell was not as strong as the premarket resistance. These are two cons that can easily affect recovery efforts to begin with if there is not further slowing on the sell side.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day with a loss of 115.42 points, or 0.96%, and closed at 11,934.58 on Friday. Only DuPont (DD) (+1.25%), Kraft Foods (KFT) (+0.99%), and Boeing (BA) (+0.01%) managed to end the session in the black. The weakest performers were Cisco Systems (CSCO) (-3.49%), Pfizer (PFE) (-2.76%), Intel (INTC) (-2.35%), and General Electric (GE) (-2.23%). The Dow ended the week lower by 0.58% and is off 5.05% month-to-date.
The S&P 500 ($SPX) loss of 15.05 points, or 1.17%, and closed at 1,268.45. The top percentage performers in the S&P 500 on Friday were Discover Financial Services (DFS) (+3.77%), Biogen Idec (BIIB) (+2.73%), Campbell Soup (CPB) (+2.39%), and Newell Rubbermaid (NWM) (+2.02%). Micron Technology (MU) (-14.47%) was the weakest percentage performer after it reported third-quarter sales and profit that fell short of analysts' expectations. It was followed by losses in Sandisk (SNDK) (-9.19%), Tesoro (Corp.) (-6.92%), and Valero Energy (VLO) (-6.38%). The S&P 500 ended the week lower by 0.24% and is down 5.71% so far this month.
Nasdaq Composite (Figure 3)
The Nasdaq Composite ($COMPX) ended the session lower by 33.86 points, or 1.26%, on Friday and it closed at 2,652.89. Eight of the index components in the Nasdaq-100 posted a gain. The top performers were Biogen Idec (BIIB) (+2.73%), Vertex Pharmaceuticals (VRTX) (+1.19%), and Flextronics (FLEX) (+0.95%). Micron Technology (MU) (-14.47%) was the weakest percentage performer. It was followed by losses in Sandisk (SNDK) (-9.19%), First Solar (FSLR) (-4.81%), Oracle (ORCL) (-4.07%) and Research In Motion (RIMM) (-4.03%). Oracle's (ORCL) losses followed a report of a fiscal fourth-quarter decline of 6% in hardware sales late Thursday. The Nasdaq Composite ended the week higher by 1.39%, but is still down 6.43% this month.
Overall my bias has changed much over the past several trading days. We're continuing to see stronger intraday setups on 5-15 minute time frames with less follow-through from day to day. This is favoring daytraders as anticipated. We're also still seeing larger potential for slightly lower daily lows in the Dow and S&P 500 as the Dow approaches its 200 day moving average. This can created a larger daily Momentum Reversal as the overall pace of the daily selloff slows over the next several weeks. This will continue to mean added risk for swingtraders in general at this time.
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.