End of a Winning Streak
After a week of the strongest action the market has seen in nearly two years, the market finally took time to catch its breath on Tuesday as we kicked off a shortened trading week in the States following the 4th of July holiday. Volume was lighter throughout the session with many market participants still enjoying an extended weekend, but decreasing volume is also quite common following strong price moves on the upside and is another sign of exhaustion for an uptrend.
Dow Jones Industrial Average (Figure 1)
The intraday action on Tuesday was on the choppy side still with a narrower range that continued to limit daytrade opportunities, but the market began to have stronger back and forth types of swings than seen throughout the previous week. This is welcome news for daytraders who want to take advantage of moves off intraday highs and lows instead of the tiny 1-2 minute bull flags that flanked the larger 30-minute breakouts last week. While these larger breakouts were perfect opportunities for those that caught them, many happened outside regular market hours, leaving only the smaller scalpish entries intraday.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a loss of 12.90 points, or 0.1%, and closed at 12,569.87.A third of the Dow's thirty index components posted a gain on the day. The top performers were Chevron (CVX) (+0.99%), Disney (DIS) (+0.63%), and IBM (IBM) (+0.51%). The weakest performers were Hewlett-Packard (HPQ) (-1.57%), JP Morgan Chase (JPM) (-1.32%), and Travelers Companies (TRV) (-0.98%).
Next page: Into the numbers
The S&P 500 ($SPX) loss of 1.79 points, or 0.13%, and closed at 1,337.88. The strongest percentage performers in the index on Tuesday were Netflix (NFLX) (+8.07%), Abercrombie & Fitch (ANF) (+3.91%), Marathon Oil Corp. (MRO) (+3.40%), and Salesforce.com (CRM) (+3.05%). The weakest performers in the index were Textron Inc. (TXT) (-5.05%), SAIC Inc. (SAI) (-4.71%), Western Union Co. (WU) (-4.45%), and Comerica Inc. (CMA) (-3.02%). SAIC's losses followed a downgrade, while Netflix jumped after the company announced that it would be expanding its video streaming services throughout the Western Hemisphere.
Nasdaq Composite (Figure 3)
The Nasdaq Composite ($COMPX) ended the session higher by 9.74 points, or 0.35%, on Tuesday and it closed at 2,825.77. The strongest performers in the Nasdaq-100 were Netflix (NFLX) (+8.07%), Illumina Inc. (ILMN) (+2.39%), Google (GOOG) (+2.19%), and Priceline.com (PCLN) (+2.01%). The weakest were KLA-Tencor (KLAC) (-2.03%), Sears Holdings Corp. (SHLD) (-1.89%), Linear Tech. Corp. (LLTC) (-1.68%), and NVIDIA (NVDA) (-1.67%).
Next page: Today's outlook
Latest Employment Data Takes Over the Spotlight
Heading into Wednesday, we'll start to see a lot of focus shifting to the jobs market. The ADP employment change data for June is due out ahead of the open, followed by last week's unemployment claims on Thursday. Then on Friday the government rolls out the big numbers: the latest nonfarm payroll data, unemployment rate, average workweek, and hourly earnings.
From a technical standpoint we should continue to see slower day to day price shifts without the strong trend days that persist from one session into the next. The slowdown we began to watch for at the end of last week finally kicked in and the pace of the trend channel on the 60-minute charts should continue to shift throughout the week. This will lead to stronger daytrading opportunities with better intraday swings as opposed to the choppy, yet steady intraday trends of last week. It will mean a more difficult time for those entering new swingtrades (multi-day holds).
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.