Nasdaq Composite (Figure 3)
European Debt Crisis and Quarterly Earnings Vie for Influence
Although the jobs situation at home has been a focus in recent weeks with eyes on Obama's jobs plan, eyes have returned to the European debt crisis and towards third quarter earnings after Obama's bill hit a major roadblock in the Senate early last week. European leaders are struggling to reach an agreement of their own on how to handle their own economic turmoil and headlines have wavered from positive to negative on nearly a daily basis.
While the market struggles with major resistance on daily and weekly time frames, earnings have now also entered the mix. Nearly half of the Dow's thirty index components report this week, including Intel (INTC), McDonalds (MCD), and General Electric. Among S&P 500 companies (96 of whom report this week), earnings are expected to have risen 23% in Q3 (according to Thomson Reuters). Meanwhile, revenues are expected to have increased 10%.
All of these variables mixed together with the resistance on the heels of two weeks of strong upside are a recipe for a choppy market as the indices sway from one day to the next based upon the latest news to hit the wires. A wider momentum shift with the indices creeping higher over the next week or two remains quite possible, but resistance levels and a larger shift in the upside momentum on the 60 minute charts is beginning to favor the bears in many individual securities.
Potential magnets to pull the market higher are the 200 day moving averages which loom just overhead in the S&P 500 and Dow, while prior highs are near at hand in the Nasdaq. The pace of Monday's selloff, however, leaves this possibility up in the air. In order for more buying to materialize to pull the market into these next levels of resistance, the indices need a rather strong reaction off the price support zone that is hitting on the intraday time frames in the index futures heading into midnight. This support includes prior lows and 10 day moving averages.
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.