TUESDAY'S MARKET WRAP-UP
Good day fellow traders!!! The market had an impressive session on Tuesday to follow-up on Monday's strong recovery off early premarket lows. The congestion we had our eye on heading into Tuesday morning did hold and broke higher early in the session, triggering a breakout from the 60-minute trading range. Although this did increase the risk that the breakout would not be as sustainable on the daily time frame as a move with additional rounding off at lows, the pace of the rally was strong enough to shift it dramatically compared to the selling that took place heading into June.
Dow Jones Industrial Average (Figure 1)
The intraday action on Tuesday was not as exciting on the 5 minute time frame as it was with the 15 minute breakout. The market didn't offer strong swings in price on the 2-5 minute charts to give daytraders strong continuation moves in the overall indices, although individual securities fared much better. Instead, the market just puttered along, steadily making new highs throughout the session and ending on a strong note with the Dow retesting its 100-day moving average resistance and the S&P 500 back at the upper end of the larger 120-minute trading range. As anticipated, the Nasdaq had the cleanest break on the upside.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 145.13 points, or 1.21%, and closed at 12,188.69 on Tuesday. Twenty-six of the Dow's thirty index components posted a gain. The top performers were Caterpillar (CAT) (+3.02%), McDonald's (MCD) (+2.47%), Home Depot (HD) (+2.44%), and Alcoa (AA) (+2.42%). The weakest were JP Morgan Chase (JPM) (-0.85%), Disney (DIS) (-0.39%), Bank of America (BAC) (-0.28%), and Procter & Gamble (PG) (-0.16%).
The S&P 500 ($SPX) gain of 16.57 points, or 1.29%, and closed at 1,296.67. Nike (NKE) (+10.14%) was the top percentage performer. Other top performers were Monster Worldwide (MWW) (+9.80%), First Solar (FSLR) (+6.80%), and SuperValu (SVU) (+5.68%). The weakest percentage performers were Motorola Mobility (MMI) (-3.42%), Lorillard (LO) (-1.85%), and Altria Group (MO) (-1.53%).
Nasdaq Composite (Figure 3)
The Nasdaq Composite ($COMPX) ended the session higher by 41.03 points, or 1.53%, on Tuesday and it closed at 2,729.31. The top performers in the Nasdaq-100 were Ctrip.com (CTRP) (+7.84%), First Solar (FSLR) (+6.80%), and Green Mountain Coffee (GMCR) (+4.41%). The weakest were Vodaphone (VOD) (-1.21%), Flextronics (FLEX) (-0.94%), and Garmin Ltd. (GRMN) (-0.93%).
A lot of the recognition for this rally over the past several days has been attributed to developments in Greece as plans for its debt and austerity measures continue to unfold. The plan is the focus of the Greek parliament on Wednesday and will be followed by a vote on implementation measure on Thursday. The U.S. index futures were up sharply once again in premarket trade heading into Wednesday morning.
This third push higher in the indices leaves the market dealing with resistance heading into Wednesday's trading session in the States. A small Momentum Reversal in the Dow and S&P 500 futures around 7:30 a.m. ET already led to an initial correction prior to Wednesday's opening bell. There is still some room for further upside on the 30-minute time frame, but the focus should be on the shorter-term intraday time frames since the market is likely to hold intraday highs mid-day.
The main intraday data to watch in the States will be the 10:00 a.m. ET report on pending home sales.
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.