TUESDAY'S MARKET WRAP-UP
Market Snapshot for September 20, 2011 (5:05 pm ET):
- Closing Prices: DOW 11,408.66 (+7.65, +0.07%),S&P 500 1,202.09 (-2.00, -0.17%), NASDAQ 2,590.24 (-22.59, -0.86%), Nikkei 225 8,721.24 (-142.92, -1.61), DAX 5,571.68 (+155.77, +2.88%), FTSE 5,363.71 (+104.15, +1.98%)
- OIL 85.50, GOLD 1,806.30, SILVER 39.83
- EURO 1.3703, YEN 76.40, BRITISH POUND 1.5744, U.S. DOLLAR INDEX 77.505
Good day! I'm back! Well, sort of! I'm proud to announce the arrival a very healthy little market apprentice to our family: Sean Aslan Sever was born on August 22, 2011, and we're settling into our new home in Illinois quite well (albeit not looking forward to the winters). I've already introduced him to the ins and outs of candlestick charting. I'm pretty certain that he's in awe (or it could just be the really bright colors, but I think my original interpretation is more likely)! I'm currently recovering from a nasty virus picked up at the little guy's three-week check-up, but I'll be back to writing my daily market commentary full-time starting next Monday. Until then, I have an abbreviated update and outlook that I'll be sending your way and in October I'll be kicking off a new weekend letter containing a lesson and trade for the upcoming week. Have a wonderful trading day!
All my best,
Price Resistance Puts a Cap on Market Gains
The past two months have been some very exciting ones for market participants, and not necessarily in a good way in the case of longer-term investors. After the sharp collapse the indices experienced into early August, the major indices have been in corrective mode. This has consisted primarily of a wide trading channel occupying the lower half of the correction off this year's highs. For the most part, volume has been dropping off throughout this period, suggesting that the correction will continue to struggle as the month wears on.
Tuesday was particularly difficult for the bulls, which had been making another comeback attempt throughout last week. The indices were dealing with strong daily resistance, however, which proved difficult to break. The Nasdaq was the strongest of the three indices and had the most obvious resistance. It struck the upper end of its daily trading channel following a second push off August's double bottom. This high was also approximately an equal move this month when compared to the end of last. Another example of this type of resistance can be seen in premarket trade in the Dow index futures (shown in blue on the 15 minute YM - Figure 1).
Dow Jones Industrial Average (Figure 1)
Tuesday kicked off with a strong run throughout most of the morning, but by afternoon this rally was beginning to fade. The price action we saw develop intraday on the 15 minute charts was almost identical to the daily pattern that developed into the end of July and the outcome was equally as powerful, albeit on a smaller scale (comparison shown in blue on the ES - Figure 2). Afterhours we are now seeing the same type of trading range or congestion play out in the index futures as we have seen on the daily charts over the past six weeks.
Wednesday's focus will be upon the afternoon Fed announcement for interest rates and the corresponding statement. Typically the morning of a Fed announcement is decent for trading and more often favors the bulls. It becomes more difficult mid-day as volume dries up. Right now there is a strong technical bias in favor of a move lower following the announcement if the market holds up into the news release. A trend day is unlikely. Use caution trading the immediate aftermath of the event, however, since volatility will be high. Waiting several minutes for price action to begin to normalize can be well-worth it. The Fed news hasn't yielded the extreme post-announcement moves over the past year that we used to see before the Fed went into holding pattern, but the best moves to play after the announcement tend to be the secondary and tertiary reactions intraday on the 2-5 minute time frame. Last month the FOMC agreed to keep rates low until at least March of 2013.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a gain of 7.65 points, or 0.07%, and closed at 11,408.66. The top gainers in the Dow were Home Depot (HD) (+1.34%), Intel (INTC) (+1.23%), American Express (AXP) (+1.21%), and Travelers (TRV) (+1.04%). The weakest were Alcoa (AA) (-2.85%), Hewlett Packard (HPQ) (-1.92%), Bank of America (BAC) (-1.29%), and Caterpillar (CAT) (-1.11%).
The S&P 500 ($SPX) loss of 2.00 points, or 0.17%, and closed at 1,202.09. The top percentage performers in the index were Interpublic Group (IPG) (+8.26%), Celgene Corp. (CELG) (+7.14%), Newmont Mining Corp. (NEM) (+5.48%), and Carnival Corp. (CCL) (+5.05%). The weakest performers were Netflix (NFLX) (-9.54%), Coventry Health Care (CVH) (-6.83%), CH Inds. Holdings (CF) (-6.52%), Cliffs Natural Resources (CLF) (-6.44%), and Alpha Natural Resources (ANR) (-5.71%).
The Nasdaq Composite ($COMPX) ended the session lower by 22.59 points, or 0.86%, on Tuesday and it closed at 2,590.24. The strongest percentage gainers in the Nasdaq-100 ($NDX) were Celgene Corp. (CELG) (+7.14%), Cerner Corp. (CERN) (+4.32%), Vertex Pharmaceuticals (VRTX) (+3.73%), and Alexion Pharmaceuticals (ALXN) (+3.68%). The top decliners were Netflix (NFLX) (-9.54%), F5 Networks (FFIV) (-5.69%), First Solar (FSLR) (-5.60%), Illumina Inc. (ILMN) (-5.17%), and Joy Global (JOYG) (-5.17%).
Nasdaq Composite (Figure 3)
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.