Stock indexes are poised for earnings season

Market Snapshot for October 12, 2011 (1:45 a.m. ET):

  • Closing Prices: DOW 11,416.30 (-16.18, -0.15%), S&P 500 1,195.54 (+0.65, +0.05%), NASDAQ 2,583.03 (+16.98, +0.66%), Nikkei 225 8,754.40 (-19.28, -0.22), DAX 5,865.01 (+17.72, +0.3%), FTSE 5,395.70 (-3.30, -0.06%)
  • OIL 85.60, GOLD 1,669.80, SILVER 32.22
  • EURO 1.3632, YEN 76.70, BRITISH POUND 1.5582, U.S. DOLLAR INDEX 77.99

Bulls Hold Their Breath

The market has been on a roar since putting in a short-term bottom on October 4th, but the indices have struggled since late Monday morning to make further head-way. Tuesday's session ended up being a rather mellow one. Volume was light compared to the average of the past several months and the day's trading range was also a lot narrower. The index futures were trading lower ahead of the open, but rallied to push through Monday's closing high within the first hour and fifteen minutes of the regular trading session on Tuesday.

Technology shares led the morning rally in the indices. This gave the Nasdaq a lead over the Dow and S&P 500. The morning rally in the Nasdaq took it to equal move resistance on the 15 minute time frame at 10:45 a.m. ET. This is a typical correction period intraday and morning highs (and lows) are often made at this time of the day. The market did not fully reverse at this point, but the Dow also struck resistance at Monday's highs and a brief retracement of the day's gains followed.

Dow Jones Industrial Average (Figure 1)

After 10:45 a.m. ET the range for the session narrowed. Support and resistance levels held quite well and there were clear-cut reversal patterns (such as 2 minute Momentum Reversals) on the 5 minute time frame off the upper and lower end of the trading range, but reward to risk ratios were diminished due to continued volatility as seen by the high degree of overlap from one bar to the next on the 5 and 15 minute time frames. A lesser degree of overlap in price means that there is a better chance to select correct entry, stop, and target/exit levels with reduced risk of mismanaging a trade.

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