Nasdaq Composite (Figure 3)
Earnings Season Kicks Off
Over the past several weeks the market has been focusing heavily upon the European debt crisis and the employment situation in the States, but this week brings another focus: earnings. Alcoa (AA)kicked off earnings season with revenue that beat expectations, but it fell short on its reported earnings of 15 cents a share. This week will still be light on the number of companies reporting earnings, but among the top names reporting this week are PepsiCo (PEP) on Wednesday morning, JP Morgan (JPM) Thursday morning, and Google (GOOG) following the close on Thursday afternoon. Over the course of this earnings season, companies in the S&P 500 are expected to have risen between 12-13% for Q3 2011 with revenue up 10% (according to Thomson Reuters).
Wednesday will be a session where it will be necessary to pay attention to smaller, intraday trends for direction. The market is at a strong resistance zone on the daily charts short-term, but there is room for both the S&P 500 and Dow Jones Ind. Average to push through it to their 100 day moving averages before offering up a larger correction from this recent rally than a pull back to 60-minute 20 period moving averages, which is the support zone from last week's correction. Momentum in the early morning hours heading into Wednesday is more supportive of the bears on the 5-15 minute time frames, but this could easily shift as Wednesday's open approaches to allow for a third wave of buying on the 60-minute time frame. Overall, however, we should expect the next pullback on the daily time frame to have a more gradual pace than the rally that has taken place since October's lows hit last week.
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.