E-minis overcome holiday hump, challenges ahead

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.

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