MONDAY'S MARKET WRAP-UP
Market Snapshot for December 5, 2011 (3:10 a.m. ET, Dec.6 ):
Closing Prices: DOW 12,097.83 (+78.41, +0.65%), S&P 500 1,257.08 (+12.80, +1.03%), NASDAQ 2,655.76 (+28.82, +1.1%), Nikkei 225 8,575.16 (-120.82, -1.39%), DAX 6,025.19 (-80.90, -1.32%), FTSE 5,543.99 (-23.97, -0.43%)
OIL 100.59, GOLD 1,719.60, SILVER 32.105
EURO 1.3366, YEN 77.75, BRITISH POUND 1.5634, U.S. DOLLAR INDEX 78.885
Rally Crushed Monday by Threat of S&P Ratings Cuts Throughout EU
After strong rallies last week, the market was hit with a blow on Monday after Standard & Poor's placed the credit ratings of more than a dozen European nations on "credit watch negative" for a potential downgrade. The credit watch included all 15 of the euro-zones remaining countries. Portugal and Greece had already been downgraded to junk status.
The market was already skating on thin ice as Monday's session began. The indices struck strong price resistance from last month's highs late last week after a sharp rally, leaving them still extended on the intraday time frames heading into the new week. As Monday's session began, we were already on the look-out for the possibility of a pullback. At first, however, the indices began their correction through time, falling into a trading range that lasted throughout the morning and into the early afternoon with the indices holding resistance heading into the 10:45 ET correction period. Then came the S&P news and stock prices plummeted.
(Note: The S&P went further on Tuesday morning by announcing that it was also placing the European Financial Stability Facility (EFSF) on negative watch.)
Dow Jones Industrial Average (Figure 1)
Monday's Index Wrap-up
The Dow Jones Industrial Average ($DJI) ended the day on Monday with a gain of 78.41 points, or 0.65%, and closed at 12,097.83. Twenty-four of the Dow's thirty index components posted a gain. The top performers were JP Morgan (JPM) (+3.65%), Bank of America (BAC) (+2.66%), DuPont (DD) (+2.04%), and Microsoft (MSFT) (+1.90%). The weakest performers were Merck (MRK) (-0.62%) and McDonalds (MCD) (-0.37%).
The S&P 500 ($SPX) finished the session with a gain of 12.80 points, or 1.03%, and closed at 1,257.08. The strongest sectors on Monday included financials, oil and gas equipment and services, and metals and mining stocks. The strongest individual percentage performers in the index were Tenet Healthcare (THC) (+12.44%), Gannett Inc. (GCI) (+10.24%), Morgan Stanley (MS) (+6.77%), and Titanium Metals Corp. (TIE) (+6.71%). The weakest were Washington Post (WPO) (-4.46%) and Newfield Expl. (NFX) (-3.44%).
The Nasdaq Composite ($COMPX) ended the session higher by 28.83 points, or 1.1%, on Monday and it closed at 2,655.76. The top index components in the Nasdaq-100 ($NDX) were Illumina Inc. (ILMN) (+5.98%), Netflix (NFLX) (+5.65%), and Staples (SPLS) (+5.58%). The weakest were Alexion Pharmaceuticals (ALXN) (-2.81%) and Sirius XM Radio (SIRI) (-2.69%).
S&P 500 (Figure 2)
Correction Periods Play Pivot Roles in Intraday Price Action
The selling pressure in the market resumed had resumed on Monday at the 15:00 ET correction period after the market paused at 5 minute, 200 period moving average support 30 minutes after the initial wave of selling kicked off. The market remained under pressure afterhours, but the pace of the selling slowed and by the time the European markets opened we were already seeing some recovery action in the form of a 15 minute Phoenix as the index futures hugged 15 minute 20 period moving average resistance. The buy trigger came at 3:00 a.m. ET and the recovery continued into mid-morning when the Dow Jones Ind. Average ($DJI) struck price resistance from Monday's breakdown zone. This zone hit at the same time as the 10:45 ET correction period that served to help put a halt on Monday's rally.
Nasdaq Composite (Figure 3)
Getting Technical in Tuesday's Trade
As Tuesday's session progresses, the market is going to continue to face stiff resistance from November's highs. Slightly higher highs on the 30-minute charts this month in the S&P created bull traps, while a triangle on that same time frame in the Nasdaq threatens further weakness in the short term. On the five minute time frame the indices are also facing a struggle with the onset of the 10:45 ET correction period. The market had established an initial wave of buying on the intraday charts in the final 30 minutes of trade on Monday. This was followed by a secondary move higher into the 10:45 ET zone, but the pace was more gradual, weakening the move and leading me to post a corrective bias on that time frame for those who follow me on Facebook. Getting more than the smaller, intraday scalps off the 5 minute charts will be difficult for index traders today.
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.