Market Snapshot for October 13, 2011 (7:50 a.m. ET):
· Closing Prices: DOW 11,478.13 (-40.72, -0.35%), S&P 500 1,203.66 (-3.59, -0.3%), NASDAQ 2,620.24 (+15.51, +0.6%), Nikkei 225 8,823.25 (-, -), DAX 5,914.84 (-79.63, -1.33%), FTSE 5,403.38 (-38.42, -0.71%)
· OIL 84.13, GOLD 1,668.00, SILVER 31.795
· EURO 1.3764, YEN 76.88, BRITISH POUND 1.5754, U.S. DOLLAR INDEX 77.285
Tech Shares Lead While Financials Struggle
Thursday's trade was mixed as earnings season started to heat up. The market has been on a roar for a week and a half and has been pushing hard to hit the next daily resistance in the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI) at 100-day moving averages, but the slowdown we were looking for emerged on Thursday thanks to a larger price correction off Wednesday's highs compared to other corrections within this daily recovery. As with many pullbacks, the correction was two-fold. It began with a sharp decline into the close on Wednesday, but after consolidating afterhours the secondary pullback was much more gradual into early morning trade on Thursday. In index futures slid down 15 minute 20 period moving average resistance, keeping things alive for the bulls heading into Thursday's opening bell.
Dow Jones Industrial Average
The slower pace of the secondary wave of selling on the all-sessions time frame in the index futures continued into Thursday morning. Weakness was most pronounced in the financials (-2.4% in the S&P 500 industry group) despite an upside earnings surprise from JP Morgan (JPM). Tech shares, on the other hand, held up extremely well against early market selling ahead of Google's earnings and the S&P 500 techs posted a gain of 1%. Google (GOOG) provided a pleasant boost even further afterhours on strong quarterly results.
Intraday the market rounded off at lows on the 5 minute time frame. Both the S&P 500 and Dow Jones Ind. Averages created solid reverse head and shoulders patterns off lows that was followed by strength throughout the afternoon. This reversal recovered a large portion of the premarket losses even though the indices still posted a loss for the session. The stronger Nasdaq, however, began its recovery from the prior afternoon's deterioration almost immediately and ended the session with its seventh gain in the past eight sessions.
The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a loss of 40.72 points, or 0.35%, and closed at 11,478.13. Eleven of the Dow's thirty index components posted a gain. The top performers were Intel (INTC) (+1.17%), McDonalds (MCD) (+ 1.08%), and Cisco Systems (CSCO) (+0.99%). The weakest were the financials: Bank of America (BAC) (-5.47%), JP Morgan (JPM) (-4.82%), and American Express (AXP) (-1.49%). Travelers (TRV) fell 1.92%.
The S&P 500 ($SPX) finished the session with a loss of 3.59 points, or 0.3%, and closed at 1,203.66. The top percentage performers in the index were Range Res. Corp. (RRC) (+8.77%), Owens Ill. Inc. (OI) (+8.47%), Sprint Nextel (S) (+8.17%), and Micron Tech. (MU) (+6.15%). The weakest percentage performers were Genworth Financial Inc. (GNW) (-5.60%), Bank of America (BAC) (-5.47%), Citigroup (C) (-5.34%), JP Morgan (JPM) (-4.82%), and Legg Mason (LG) (-4.69%).
The Nasdaq Composite ($COMPX) ended the session higher by 15.51 points, or 0.6%, on Thursday and it closed at 2,620.24. The strongest performers in the Nasdaq-100 ($NDX) were Vertex Pharmaceuticals (VRTX) (+9.05%), Micron Tech. (MU) (+6.15%), NVIDIA Corp. (NVDA) (+5.82%), and Seagate Tech. (STX) (+5.72%). The weakest were Wynn Resorts (WYNN) (-4.67%), Fastenal Co. (FAST) (-2.66%), Apollo Group (APOL) (-2.31%), and Dentsply Intl. Inc. (XRAY) (-1.68%). Google (GOOG) shares surged more than 5% afterhours by beating earnings expectations.
Although the pace of the buying in the indices has shifted as the weekend approaches, the market is still looking to push into 100 day moving average resistance levels. Gradual price correction afterhours created a strong upside continuation pattern heading into midnight on Thursday. This picked up steam throughout premarket trade. By 6:00 a.m. ET, however, 15 minute equal move levels had already hit. This is a strong price resistance level and created a pullback into 8:00 a.m. ET.
September's retail sales provided an extension of the early gains thanks to a 1.1% jump that topped expectations, but this now leaves the market overly extended ahead of Friday's open. There's a strong likelihood that we will see the session's highs hit this morning with profit-taking ahead of the closing bell as the week winds down. I'll be looking for more of a range bound or narrower intraday trade with the best follow through for reward to risk ratios on 2-5 minute setups versus 15 minute ones.
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.