Market Snapshot for October 16, 2011 (8:37 p.m. ET):
- Closing Prices: DOW 11,644.49 (+166.36, +1.45%), S&P 500 1,224.58 (+20.92, +1.74%), NASDAQ 2,667.85 (+47.61, +1.82%), Nikkei 225 8,882.26 (+134.30, +1.54), DAX 5,967.20 (+52.36, +0.89%), FTSE 5,466.36 (+62.98, +1.17%)
- OIL 87.43, GOLD 1,680.50, SILVER 32.16
- EURO 1.3856, YEN 77.26, BRITISH POUND 1.5804, U.S. DOLLAR INDEX 76.96
Last week ended on a strong note as the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI) continued to push their way into their 100-day moving averages. We've been targeting this as the next major level of resistance in the market and it's done a good job over the past week of working its way higher even though the momentum of the overall rally has slowed as anticipated when compared to the previous week.
Strength overseas combined with strong economic data to add to the market's strength heading into Friday's session. The index futures broke higher in the early morning hours from a solid consolidation late Thursday evening. This left the market extended heading into Friday morning, but solid data helped provided an additional boost in premarket trade.
According to the Commerce Department, September's retail sales jumped 1.1% to top expectations. The pace was the fastest in seven months. August growth was also upwardly revised to 0.3%. U.S. import prices were also on the rise with an unexpected 0.2% increase in September. This was primarily a result of increased fuel and food costs.
Dow Jones Industrial Average (Figure 1)
From a technical standpoint, I expected a strong possibility that we would see the indices hit highs early in the session on Friday as a result of the premarket exhaustion. This first reversal pattern of the day actually took place shortly after the open. The momentum of the premarket buying had shifted heading into the open, creating a momentum reversal around 9:50 a.m. ET. The 9:55 a.m. ET Reuters/University of Michigan consumer sentiment index helped. Economists had anticipated an increase in consumer confidence from September's reading of 59.4. Instead, it fell to 57.5. The indices reacted negatively to the news and the market continued lower throughout the morning before striking support mid-day from premarket congestion.
Intraday on Friday we were also looking for narrower trading action as the weekend approached. Although the session had a narrower intraday range than most days of the past two months, the intraday trending action was better than I'd originally expected. The market held lows mid-day and a shallow Phoenix formed along the 5 minute 20 period moving averages. This led to a resumption of the week's uptrend throughout the remainder of the session and even though the market had put in a high on the 15 minute time frame in the morning, it still managed to break to new highs in the afternoon.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Friday with a gain of 166.36 points, or 1.45%, and closed at 11,644.49. Twenty-eight of the Dow's thirty index components posted a gain. The top performers were Caterpillar (CAT) (+3.25%), DuPont (DD) (+3.02%), Disney (DIS) (+2.74%), and Chevron (CVX) (+2.74%). The losers were American Express (AXP) (-0.50%) and Bank of America (BAC) (-0.48%). The Dow ended the week higher by 4.88% and is now up 0.58% year-to-date.
The S&P 500 ($SPX) finished the session with a gain of 20.92 points, or 1.74%, and closed at 1,224.58. The strongest sector on Friday was energy, which rose 3.6%. (Oil was up 3.2%.) The top individual percentage performers in the index were Harman Intl. Inds. (HAR) (+9.63%), Pioneer Nat. Res. (PXD) (+7.85%), Lincoln Natl. Corp. (LNC) (+7.72%), and Marathon Pete. Corp. (MPC) (+7.02%). The top decliners were Microchip Technology (MCHP) (-5.27%), Janus Cap. Group (JNS) (-3.26%), and Safeway Inc. (SWY) (-1.45%). The S&P 500 ended the week higher by 5.98%, but it is still down 2.63% year-to-date. All ten of the S&P's industry sectors were in the black for the week, led by energy.
The Nasdaq Composite ($COMPX) ended the session higher by 47.61 points, or 1.82%, on Friday and it closed at 2,667.85. The strongest performers in the Nasdaq-100 ($NDX) were Google (GOOG) (+5.85%), Sirius XM Radio (SIRI) (+4.65%), Autodesk (ADSK) (+4.61%), and Amazon.com (AMZN) (+4.47%). Google's gains were thanks to stronger-than-anticipated earnings and revenue posted Thursday afternoon. The top decliners were Microchip Technology (MCHP) (-5.27%), Vertex Pharmaceuticals (VRTX) (-1.37%), and Mylan Inc. (MYL) (-1.12%). The Nasdaq Composite ($COMPX) was up 7.60% for the week and is now up 0.56% year-to-date.
Nasdaq Composite (Figure 3)
The trend which resumed on Friday afternoon continued into Sunday evening trade. This took the S&P 500 and Dow futures to the 100-day moving average resistance that we've been following. It also leaves the market once again overbought heading into early Monday morning on at least the 15 minute time frame and in favor of a pullback. Since the pace of the upside on the 60-minute trend off the month's lows increased on Friday into the closing bell and continued on Sunday afternoon, however, there is now a better chance that it can break that level without a strong daily correction like we would have expected if the momentum of the buying had continued to slow. I've shown this increase in pace in blue on the 30-minute NQ (Nasdaq-100 e-mini) in Figure 3. Nevertheless, I would not expect a strong break higher. The S&P 500 and Dow are both striking 20 sma resistance on the weekly time frames and the 200 day sma is nearby in the Dow. The Nasdaq is also closing in on its prior highs.
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.