Stock market pauses ahead of Wednesday's Fed

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

UPDATE

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,
Toni

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.

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