FRIDAY'S MARKET WRAP-UP
Market Snapshot for October 31, 2011 (12:30 a.m. ET):
Closing Prices: DOW 12,231.11 (+22.56, +0.18%), S&P 500 1,285.09 (+0.50, +0.04%), NASDAQ 2,727.15 (-1.48, -0.05%), Nikkei 225 9,038.56 (-11.91, -0.13), DAX 6,346.19 (+8.35, +0.13%), FTSE 5,702.24 (-11.58, -0.2%)
OIL 92.53, GOLD 1,721.20, SILVER 34.49
EURO 1.3999, YEN 79.17, BRITISH POUND 1.5978, U.S. DOLLAR INDEX 76.345
Market Takes Pause Ahead of the Weekend
Friday was a slow day for the markets. After strong upside into Thursday afternoon, the indices were once again hitting intraday resistance ahead of the closing bell and were falling into corrective mode. Daily resistance from prior highs and congestion this summer also gave the markets reason to pause. Hope for a solution to the European Union's debt crisis fueled the rally on Thursday, but detailed plans on how such a solution will be implemented remain allusive. Although we are in the midst of earnings season, eyes will remain on Europe with the leaders of meeting at the G-20 summit in Cannes from November 3-4. The European Central Bank's interest rate announcement will also be out this week on Thursday, while our own FOMC rate decision will be out on Wednesday following a two-day Fed meeting.
Dow Jones Industrial Average (Figure 1)
Friday's Economic Reports
Personal income in September was virtually unchanged with a gain of only 0.1%. Consumer spending, however, was up 0.6%. This was also reflected in a higher consumer sentiment reading released later in the morning that howed that October's consumer sentiment index rose more than anticipated to a reading of 60.9. Nevertheless, the market had little reaction to the news.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Friday with a gain of 22.57 points, or 0.18%, and closed at 12,231.11. This mixed session left the gainers only slightly better than on par with the losers in the index. The top performers were Hewlett-Packard (HPQ) (+3.52%), Merck (MRK) (+2.33%), Alcoa (AA) (+2.03%), and Bank of America (BAC) (+1.94%). The weakest index components were Home Depot (HD) (-2.96%) and WalMart (WMT) (-1.14%). The index ended the week higher by 3.58%.
The S&P 500 ($SPX) finished the session with a gain of 0.50 points, or 0.04%, and closed at 1,285.09. One of the strongest of the index's industry groups was technology. The strongest individual percentage performers were Monster Worldwide (MWW) (+11.66%), United States Steel Corp. (X) (+11.57%), Interpublic Group (IPG) (+11.21%), and Newell Rubbermaid (NWL) (+11.14%). The weakest were Whirlpool Corp. (WHR) (-14.34%), Cablevision Sys. Corp. (CVC) (-12.54%), and MetroPCS Communications (PCS) (-8.12%). The index ended the week higher by 3.78%.
The Nasdaq Composite ($COMPX) ended the session lower by 1.48 points, or 0.05%, on Friday and it closed at 2,737.15. The strongest performers in the Nasdaq-100 ($NDX) were Green Mountain Coffee (GMCR) (+8.48%), Amazon.com (AMZN) (+5.10%), and Baidu (BIDU) (+4.50%). The weakest performers were Expedia Inc. (EXPE) (-6.22%), Virgin Media (VMED) (-4.99%), and Stericycle Inc. (SRCL) (-4.60%). The Nasdaq Composite ($COMPX) ended the week higher by 3.78%).
Nasdaq Composite (Figure 3)
From an economic standpoint, this week is going to be a busy one for the markets. On top of the G-20 and interest rate decisions, are the latest reports on employment in the U.S. October's nonfarm payrolls are due out on Friday, along with October's average workweek, hourly earnings, and unemployment rate.
Additionally, this is the final "big week" for third-quarter earning reports. Top names reporting this week include Humana (HUM) on Monday; Baker Hughes (BHI) and Pfizer (PFE) on Tuesday; Kraft Foods (KFT), MasterCard (MA), Qualcomm (QCOM), and Transocean (RIG) on Wednesday; and American Intl. Group (AIG), Cigna (CI), and Starbucks (SBUX) on Thursday. So far this quarter 71% of the earnings reports that have been released have topped Wall Street estimates, primarily due to growth outside of Europe and the United States.
As we head into Monday morning, the market remains in correction mode. The index futures have pulled back steadily since their open Sunday evening. The 30-minute 200 period moving average has been serving as a support zone for the latest uptrend, but has not yet hit on this most recent correction. This leaves it some more room ahead of the open and even early in the day to continue to pullback, but the market lacks a strong technical setup for new positions on the 15-minute time frame. As on Friday, it's going to be the 5 minute charts that lead and small shifts in momentum on this level will be key for intraday action. The 15 minute charts are most suggestive of further downside, but so far the series of slightly lower lows on the 5 minute time frame are indicating hesitation. My personal focus heading into the week will be on earnings plays and gaps since these will have more decisive intraday action that will not rely as heavily upon overall market participation to show strong follow-through.
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.