MONDAY'S MARKET WRAP-UP
Good day fellow traders!!! The market continued its roller coaster ride in Monday's session with another swing to the upper end of the 60-minute trading channel. The trigger came in the form of the 15-minute Momentum Reversal pattern I wrote about in my weekend column and buying began within 15 minutes of the opening bell. The intraday bias was once again strongly in favor of the shorter-term daytraders as well and the strong uptrend provided ample opportunity for short-term gains.
Dow Jones Industrial Average
The Nasdaq led the session's upside, fueled by strength in technology. Microsoft (MSFT) landed a licensing deal with the military contractor General Dynamics (GD), placing it in a rare leadership position for the day. It was the strongest intraday move the stock has had year-to-date. Amazon.com (AMZN) also made waves after Morgan Stanley (MS) issued a bullish report for the company and added it to its "Best Ideas" list with strong overseas growth potential.
After triggering, the Momentum Reversal on Monday morning kept the bulls on solid ground throughout the session. A typical target for this reversal strategy is the zone of previous highs and all three of the major indices accomplished this feat by mid-afternoon. The final push into this target zone came right out of the 14:00 ET correction period with a burst of buying. Once that previous level of resistance hit, however, the momentum slowed and the indices ended the session just off intraday highs. The 20-day moving averages continued to also provide additional daily resistance at these highs.
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 108.98 points, or 0.91%, and closed at 12,043.56 on Monday. Twenty-six of the Dow's thirty index components posted a gain. The leaders included Microsoft (MSFT) (+3.70%), Bank of America (BAC) (+3.14%), American Express (AXP) (+2.48%), and General Electric (GE) (+1.73%). The losers were DuPont (DD) (-0.40%), Kraft Foods (KFT) (-0.29%), WalMart (WMT) (-0.23%), and Merck (MRK) (-0.06%).
The S&P 500 ($SPX) gain of 11.65 points, or 0.92%, and closed at 1,280.10. Amazon.com (AMZN) was the top percentage performer in the S&P 500 with a gain of 4.52%. Other top percentage performers included Microsoft (MSFT) (+3.70%), SanDisk (SNDK) (+3.65%), and Huntington Bancshares (HBAN) (+3.61%). The weakest performers were Molex (MOLX) (-3.92%), Best Buy (BBY) (-3.57%), Broadcom (BRCM) (-2.14%), and NVIDIA (NVDA) (+2.10%).
The Nasdaq Composite ($COMPX) ended the session higher by 35.39 points, or 1.33%, on Monday and it closed at 2,688.28. Amazon.com (AMZN) (4.52%), Microsoft (MSFT) (+3.70%), SanDisk (SNDK) (+3.65%), and Citrix Systems (CTXS) (+3.54%) led the Nasdaq-100 gainers ($NDX). The weakest performers in the Nasdaq-100 were Garmin (GRMN) (-2.68%), Broadcom (BRCM) (-2.14%), NVIDIA (NVDA) (+2.10%), and Research In Motion (RIMM) (-1.40%).
The index futures held up well afterhours on Monday and into early-morning trade on Tuesday. The futures market picked up around 8:00 a.m. ET with another push back into Monday's highs that leaves the indices strongly testing their 20-day moving averages. The setup on the 60-minute charts is not a particularly strong one to allow this level to break cleanly, but the possibility does exist. I'd prefer to see some further downside attempts on this time frame to flush things out a bit more before a real attempt to correct off lows takes place though. This would diminish the risk that an attempt higher at this point would merely be a bull trap and part of a larger two-wave sell pattern on the daily time frame.
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.