S&P 500 (Figure 2)
The bad news did not stop there. The jobs reports for both April and May were downwardly revised, and average weekly hours fell, as did average weekly wages. Additionally, the unemployment rate ticked higher from 9.1% in May to 9.2% in June. The total official number of those unemployed rose to 14.1 million, while the average length of unemployment hit an all-time high of 39.9 weeks. The underemployment rate rose to 16.2%.
Friday's premarket weakness continued throughout most of the morning, although the pace of it shifted into the 11:15 a.m. ET correction period. This is a typical time of the day for a morning trend to end and mid-day reversals to begin. The index futures were striking support at this time from the congestion levels earlier in the week, but the slowing pace and support both played additional roles that allowed the market to find its footing for the day. Even though the earlier selloff prevented a rapid recovery off the support, the market held lows into the closing bells, gradually pulling higher throughout the remainder of the afternoon, but without the momentum to combat the overall bearish bias that had taken over the 15-minute time frame.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) ended the day on Friday with a loss of 62.29 points, or 0.49%, and closed at 12,657.20. Six of the Dow's thirty index components posted a gain. The top three were Merck (MRK) (+1.09%), Microsoft (MSFT) (+0.56%), and Disney (DIS) (+0.43%). The weakest were Bank of America (BAC) (-2.01%), General Electric (GE) (-1.61%), JP Morgan Chase (JPM) (-1.40%), and Boeing (BA) (-1.21%). The Dow was up 0.59% for the week.
The S&P 500 ($SPX) loss of 9.42 points, or 0.7%, and closed at 1,343.80. The strongest percentage performers in the index on Friday were Wynn Resorts (WYNN) (+2.32%), CF Inds. Holdings (CF) (+2.28%), Archer Daniels Midland (ADM) (+1.94%), and Expedia (EXPE) (+1.42%). The weakest were JDS Uniphase (JDSU) (-4.55%), Motorola Mobility (MMI) (-4.42%), Vulcan Materials Co. (VMC) (-4.18%), and Agilent Technologies (A) (-4.10%). The S&P 500 ended the week higher by 0.31%.
The Nasdaq Composite ($COMPX) ended the session lower by 12.85 points, or 0.45%, on Friday and it closed at 2,859.81. The strongest performers in the Nasdaq-100 ($NDX) were Alexion Pharmaceuticals (ALXN) (+3.80%), Wynn Resorts (WYNN) (+2.32%), Seagate Technology (STX) (+1.80%), and Expedia Inc. (EXPE) (+1.42%). The weakest were News Corp. (NWSA) (-3.90%), Virgin Media (VMED) (-3.78%), Google Inc. (GOOG) (-2.67%), and Altera Corp. (ALTR) (-2.66%). The Nasdaq Composite ($COMPX) ended the week higher by 1.55%.
Quarterly Earning Reclaim the Spotlight
As we head into the new trading week, we are also heading into the latest earnings season with second-quarter results starting to creep into the news this week. Alcoa (AA) unofficially kicks off earnings season on Monday. Novellus Systems (NVLS) will also be posting quarterly earnings today. Fastenal (FAST) follows on Tuesday and Marriott International (MAR) and Yum Brands (YUM) are due out Wednesday.
The index futures are weak heading into Monday's session. The indices experienced a second round of selling in the early-morning hours on a break lower from a tight trading channel Sunday evening. This will leave them approaching support by the time the opening bell rings, but the pace of the selling increased as the trend developed, which can have a negative impact on recovery efforts. Nevertheless, the pace is still slower than the reaction to the employment data and the daily charts are not likely to submit to a sharp pullback on the same scale as the rally which kicked off at the end of June. Rounded highs and even the potential for slightly higher highs remains over the next several weeks, but we should expect the market to start to take more of its lead from the incoming earnings reports. Typically, larger directional changes in the market will hold off until earnings season starts to wind down.
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.Market Snapshot for July 9, 2012 (12:32 am ET).