E-mini market gains erode following FOMC minutes

The Nasdaq Composite ($COMPX) ended the session higher by 21.70 points, or 0.84%, on Wednesday and it closed at 2,604.73. The strongest performers in the Nasdaq-100 ($NDX) were Infosys Ltd. (INFY) (+6.99%), Cognizant Tech. Solutions (CTSH) (+5.60%), and NII Holdings (NIHD) (+5.00%). The weakest were Alexion Pharmaceuticals (ALXN) (-4.16%), Green Mountain Coffee (GMCR) (-3.97%), and Research In Motion (RIMM) (-2.17%).

Nasdaq Composite (Figure 3)

Earnings Season Kicks Off

Alcoa's earnings marked the unofficial start of third quarter earnings season. JP Morgan (JPM) will be one to watch on Thursday morning, while Google (GOOG) reports after 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).

Outlook

Heading into Thursday, the market has continued to hold the 60-minute 20 sma support we were looking at yesterday and has offered a third wave of buying in the S&P 500 and Dow since hitting lows on the 4th. There is still room to move before striking the 100-day moving average resistance, but the market is due for a correction.

The market can correct in several ways: It can slow the pace of a trend move, essentially creating a rounded high; it can reverse, which will tend to look like an inverted "V"; or, it can fall into a trading range and correct through time.

In the first option, we would expect to see the pace of the buying slow into the weekend. This would draw the market to that 100-day moving average resistance level and can yield a more rapid initial reaction to that resistance zone. In the second scenario we would not see as much of a shift in momentum and an Avalanche on the 60-minute time frame would be likely. In the third scenario, we would also not see much of a momentum shift in the upside rally before a trading range began. Currently, the first scenario looks most promising, but in any case there is a higher degree of risk for any new swingtrades as long positions at this time.

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.

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About the Author
Toni Hansen

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.

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