TUESDAY'S MARKET WRAP-UP
Market Snapshot for December 14, 2011 (2:15 a.m. ET):
Closing Prices: DOW 11,954.94 (-66.45, -0.55%), S&P 500 1,225.73 (-10.74, -0.87%), NASDAQ 2,579.27 (-32.99, -1.26%), Nikkei 225 8,519.13 (-33.68, -0.39%), DAX 5,774.26 (-, -%), FTSE 5,490.15 (+62.29, +1.15%)
OIL 99.90, GOLD 1,642.80, SILVER 30.975
EURO 1.3038, YEN 77.94, BRITISH POUND 1.5482, U.S. DOLLAR INDEX 80.275
Rates Unchanged
Tuesday brought with it another Fed day, but as we've seen over the past several years, it hasn't led to a great deal of change. In fact, the Fed once again left its key lending rates unchanged and its outlook equally demure. It seems that perhaps the market was looking for a greater glimmer of hope in the outlook though. The indices kicked off the session in positive territory, but resistance heading into the bell held and the gap closed by 11:15 ET. The mid-day price action remained bearish as the indices formed a two-wave continuation pattern mid-day to favor a break lower into the afternoon. This breakdown came with the Fed announcement.
Dow Jones Industrial Average (Figure 1)
Congestion Rules
Last week in my column I focused a great deal upon intraday price action and the larger daily resistance that was hitting. As discussed, the slightly higher highs we were experiencing on the 30-minute time frame created a series of bull traps, which easily gave way to more rapid bursts of selling intraday. This price action also factored into Tuesday's post-Fed move. Despite the morning gap on Tuesday morning, the indices were striking upside resistance within a 30-minute triangle that had formed as a result of the rapid downside flushes and slower upside within the last wave of the triangle heading into Tuesday morning added another pro to a breakdown bias. This created a two-wave sell pattern on this larger intraday time frame with the first wave up on the 9th and second wave up beginning mid-day on Monday.
S&P 500 (Figure 2)
Tuesday's Index Wrap-up
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a loss of 66.45 points, or 0.55%, and closed at 11,954.94. Seven of the Dow's thirty index components posted a gain on Tuesday. The top performers were Pfizer (PFE) (+1.81%), Microsoft (MSFT) (+0.98%), and Procter & Gamble (PG) (+0.65%). The weakest were Alcoa (AA) (-3.32%), Caterpillar (CAT) (-2.42%), and Bank of America (BAC) (-2.39%).
The S&P 500 ($SPX) finished the session with a loss of 10.74 points, or 0.87%, and closed at 1,258.47. The strongest sector on Tuesday was the utilities, while the strongest individual percentage performers in the index Urban Outfitter (URBN) (+5.33%), Netapp (NTAP) (+2.13%), and MetroPCS Communication (PCS) (+1.91%). The weakest sectors were consumer discretionary (-2%), materials (-1.7%), and the financials, (-1.5%), while the weakest individual performers were Best Buy (BBY) (-15.46%), Harman Intl. Inds. (HAR) (-7.26%), and MEMC Electronic Materials (WFR) (-7.06%).
The Nasdaq Composite ($COMPX) ended the session lower by 32.99 points, or 1.26%, on Tuesday and it closed at 2,579.27. The top index components in the Nasdaq-100 ($NDX) were Urban Outfitters (URBN) (+5.33%), NII Holdings (NIHD) (+2.81%), and Garmin (GRMN) (+2.18%). The weakest were Green Mountain Coffee (GMCR) (-11.58%), Sears Holdings (SHLD) (-5.12%), and Amazon.com (AMZN) (-4.75%).
Nasdaq Composite (Figure 3)
OUTLOOK
We are likely to continue to see pressure on the bulls this week as well as the congestion continues to play out in the form of a larger daily correction off last week's resistance zone. Since the market held October and November's highs, however, this larger price pattern on the daily time frame is almost the mirror opposite of what we saw on the 30-minute charts and the indices are creating a second wave of correction off highs since October's reversal. A two-wave buy strategy is developing on the daily charts as long as the momentum on this second wave of correction that began this month remains more gradual than the rally heading into this month.
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.
