MONDAY'S MARKET WRAP-UP
Market Snapshot for November 14, 2011 (10:42 a.m. ET):
Closing Prices: DOW 12,078.98 (-74.70, -0.61%), S&P 500 1,251.78 (-12.07, -0.95%), NASDAQ 2,657.22 (-21.53, -0.8%), Nikkei 225 8,561.81 (-41.89, -0.49%), DAX 5,985.02 (-72.01, -1.19%), FTSE 5,519.04 (-26.34, -0.47%)
OIL 98.26, GOLD 1,779.30, SILVER 34.175
EURO 1.3621, YEN 77.13, BRITISH POUND 1.5895, U.S. DOLLAR INDEX 77.715
Bulls Struggle as New Week Kicks Off
The bulls had a difficult time heading into the new week. Resistance from late Sunday evening and early Monday morning held well. The market had room to attempt another slightly higher high heading into the European open, but a slight change in momentum on the five-minute time frame held those highs before the weakness we were looking for finally hit. Upside early Sunday evening kept the opening losses to a minimum, leaving the indices with only minor downside gaps into the bell, but the bulls were unable to regain the upper hand.
A two-wave congestion move throughout the morning as the market corrected from premarket selling led to a strong breakdown mid-day. The weakness continued into the afternoon following a similar period of correction between 12:30 and 14:15 ET. The gains made late last week off the lower end of the 60-minute trading range eroded even further following the open of the European markets on Tuesday morning before finally hitting support around 6:45 a.m. ET. Trade was actually quite decent throughout Monday and into early Tuesday morning. Support and resistance levels held extremely well and price patterns were clear-cut with strong waves of action and reaction throughout the week-to-date.
Dow Jones Industrial Average (Figure 1)
Retail sales rose by 0.5% in October, which was just over the 0.4% increase analyst's were anticipating. Excluding autos, sales were up 0.6%. An increase of 0.2% had been expected. Meanwhile, the Producer Price Index declined 0.3% in October, which a 0.2% decline had been expected. The Core Producer Price Index was flat. Finally, the Empire State Manufacturing Survey improved from -8.5 to 0.6. The index futures were already pulling up off premarket lows when the data hit the wires, but the market extended those gains before striking resistance at Monday's lows and congestion from 4:10-5:30 a.m. ET, leaving the futures still in negative territory 30 minutes prior to the open.
Even though earnings season starts to wind down this week, some name to watch for are the retailers. So far they are mixed. Home Depot (HD) beat expectations in premarket trade, while Wal-Mart (WMT) missed. Abercrombie & Fitch (ANF) report Wednesday, while Gap (GPS) reports Thursday, and Ann (Taylor) (ANN) reports on Friday.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Monday with a loss of 74.70 points, or 0.61%, and closed at 12,078.98. Out of the Dow's index's thirty components, only posted a gain. The top performers were Boeing (BA) (+1.52%), Home Depot (HD) (+0.50%), and Caterpillar (CAT) (+0.42%). The financials were the weakest. Bank of America (BAC) fell 2.58%, while JP Morgan (JPM) fell 2.19%.
The S&P 500 ($SPX) finished the session with a loss of 12.07 points, or 0.95%, and closed at 1,251.78. The strongest individual percentage performers in the index were Salesforce.com (CRM) (+2.81%), Avery Dennison Corp. (AVY) (+1.96%), and Tiffany & Co. (TIF) (+1.80%). None of the index's industry groups managed to post a gain. The weakest sectors were financials (-2%), energy (-1.2%), and the utilities (-1.2%). The weakest individual stocks were QEP Res. Inc. (QEP) (-7.59%), Bank of New York Mellon Corp. (BK) (-4.46%), and Computer Sciences Corp. (CSC) (-3.85%).
The Nasdaq Composite ($COMPX) ended the session lower by 21.53 points, or 0.8%, on Monday and it closed at 2,657.22. The top index components in the Nasdaq-100 ($NDX) were Alexion Pharmaceuticals (ALXN) (+3.98%), Qualcomm (QCOM) (+0.85%), and Baidu (BIDU) (+0.81%). Ctrip.com (CTRP) was the weakest with a loss of 12.26%. Other top decliners included Vertex Pharmaceuticals (VRTX) (-4.33%) and Green Mountain Coffee Roasters (GMCR) (-3.59%).
Nasdaq Composite (Figure 3)
The market is still struggling to break free of an extended daily trading range that began at the end of last month. The current momentum bias favors a breakdown out of the trading range and further weakness this morning would increase that probability even further, although the range itself is unlikely to break today. Instead, continue to expect last week's highs and lows to hold as major intraday support and resistance levels.
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.