FRIDAY'S MARKET WRAP-UP
Market Snapshot for December 4, 2011 (10:00 p.m. ET):
Closing Prices: DOW 12,019.42 (-0.61, -0.0%), S&P 500 1,244.28 (-0.30, -0.02%), NASDAQ 2,626.93 (+0.73, +0.03%), Nikkei 225 8,680.78 (+37.03, +0.43%), DAX 6,080.68 (+44.80, +0.74%), FTSE 5,552.29 (+62.95, +1.15%)
OIL 101.33, GOLD 1,751.10, SILVER 32.81
EURO 1.3411, YEN 77.95, BRITISH POUND 1.5608, U.S. DOLLAR INDEX 78.65
Market Overcomes Holiday Hump, but Faces New Challenges in the Week Ahead
The market performed quite a feat over the past several weeks. October began with a strong recovery after August's free-fall, but a lack-luster start to November was hit with strong selling in the second-half of the month as the Thanksgiving holiday approached. Not even Thursday's feasting and insane black-Friday door busters were enough to substantially perk the market's mood prior to the weekend. But as the new week began last week, it brought with it some renewed hope. After a rare six-day decline in which the Dow Jones Industrial Average ($DJI) remained under its 15 minute, 20-period moving average, the market turned sharply higher.
The buyers began to test the waters in Friday's shortened session, but got cold feet in the afternoon. On Monday, however, the market was able to hold strong gap higher that broke the index futures out of their downtrend channel. Breakaway gaps such as this are prime candidates leading into multi-day trend moves and boy did the market move! By the end of the week all the major indices were up over 7% and the Russell 2000 jumped a whopping 10.%.
Dow Jones Industrial Average (Figure 1)
European News Once Again Leads
Despite a strong start, it was Wednesday's session that really took the markets higher. This was largely attributed once again to Europe's influence. We've continued to hear chatter on how European leaders are intending to deal with their sovereign debt crisis, but the market has wanted fewer words and more action. On Wednesday we saw some of that talk come to fruition when the Fed, the European Central Bank, and four other leading central banks lowered the pricing on U.S. dollar swaps by 50 basis points, making it cheaper to borrow the dollar. The market jumped on the news in one of the strongest single-day moves of the year.
This single-session move left the indices extended as the week wound down, but the bulls continued to hold fast. The indices were left dealing with strong price resistance from early last month, as well as 200-day moving average resistance in the S&P 500. This put a brakes on the buying, but a Momentum Reversal into the weekend left the index futures sitting pretty heading into the new week.
S&P 500 (Figure 2)
Friday's Index Wrap-up
The Dow Jones Industrial Average ($DJI) ended the day on Friday with a loss of 0.61 points, or 0%, and closed at 12,019.42. Thirteen of the Dow's thirty index components posted a gain. The top performers were the financials: JP Morgan (JPM) (+6.14%) and Bank of America (BAC) (+1.99%). It was followed by Disney (DIS) (+1.72%) and Home Depot (HD) (+1.53%). The weakest performers were Hewlett-Packard (HPQ) (-1.91%), Johnson & Johnson (JNJ) (-1.52%), and Travelers (TRV) (-1.45%). The index ended the week higher by 7.01%.
The S&P 500 ($SPX) finished the session with a loss of 0.30 points, or 0.02%, and closed at 1,244.28. The strongest individual percentage performers in the index were Western Digital (WDC) (+7.49%), Morgan Stanley (MS) (+6.96%), and JP Morgan (JPM) (+6.14%). Western Digital's gains came after the hard-disk maker restarted production at one of its facilities in Thailand ahead of schedule following flooding damages. The weakest were Tenet Healthcare Corp. (THC) (-10.68%), Big Lots (BIG) (-8.68%), and St Jude Med. (STJ) (-7.01%). The S&P 500 ended the week higher by 7.39% with all ten of its industry groups posting gains.
The Nasdaq Composite ($COMPX) ended the session higher by 0.73 points, or 0.03%, on Friday and it closed at 2,626.93. The top index components in the Nasdaq-100 ($NDX) were Green Mountain Coffee Roaster (GMCR) (+4.45%), Comcast (CMCSA) (+3.50%), and Apollo (APOL) (+2.09%). The weakest performer was Research In Motion (RIMM) (-9.74%), which fell after lowering its full-year earnings forecast. Seagate Technology (STX) (-7.07%), and Flir Sys. (FLIR) (-3.41%). The Nasdaq Composite ($COMPX) ended the week higher by 7.59%.
Nasdaq Composite (Figure 3)
The index futures opened higher on Sunday evening and continued to push higher into early Monday morning. The bulls have continued to hang on into early trade on Monday, but unlike last Monday, in which the gap signaled a renewal of strength on a breakout, today's gap to the upside follows strength from last week and gives the bulls another hurdle to overcome. Since the rally of this past week is comparable to the week before, creating a "V" type of pattern on the daily time frame, pushing through last month's highs will be quite difficult without the market first taking more time to catch its breath.
A couple of top morning gainers to keep an eye on for continued upside this morning include Metlife (MET) and Citrix Systems (CTXS). By mid-day, however, expect to see more companies begin to struggle for further gains.
Earnings season is now behind us, but the market still has a number of outlets to turn to for market-moving news. This week will include relatively few major U.S. economic reports other than this morning's ISM services data and factory orders, but a series of meetings in Europe will still keep us busy. These will include rate meetings from the Bank of England and the European Central Bank, which is expected to cut its rates by 0.25% on Thursday.
For those that were still curious about this morning's relatively overlooked ISM Services Index for November and October's factory orders, the ISM index came in at 52.0, while factory orders fell 0.4%.
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.