THURSDAY'S MARKET WRAP-UP
Market Snapshot for January 5, 2011 (10:52 p.m. ET):
Closing Prices: DOW 12,415.70 (-2.72, -0.02%), S&P 500 1,281.06 (+3.76, +0.29%), NASDAQ 2,669.86 (+21.50, +0.81%), Nikkei 225 8,398.66 (-90.05, -1.06%), DAX 6,095.99 (-15.56, -0.25%), FTSE 5,624.26 (-44.19, -0.508%)
OIL 101.43, GOLD 1,626.50, SILVER 29.275
EURO 1.2793, YEN 77.17, BRITISH POUND 1.5504, U.S. DOLLAR INDEX 81.135
Trading Remains Mixed Heading into Friday
The market hasn't offered us much excitement over the course of this shortened holiday trading week so far. Volume has remained relatively light and action has been very mixed with the bulls taking the lead for a few hours before passing the baton to the bears. The index futures were very weak early in premarket trade on Thursday thanks to a return of weakness in Europe, but they began to recover as the opening bell in New York approached. The futures had formed two waves of downside on the 5 minute time frame on the European weakness, but at 7:00 a.m. ET the second and slower wave of selling broke to the upside, triggering a buy setup that was followed by strong upside, thanks in part to the shift in momentum of the selling. By 8:30 a.m. ET the market was back to the levels that were trading prior to Europe's open.
Dow Jones Industrial Average (Figure 1)
The prior highs from early premarket trade served as strong price resistance as the market considered the latest economic data in the States. Claims for new unemployment benefits fell 15,000 last week with initial claims for state unemployment benefits dropping to a seasonally adjusted 372,000. This was the fourth time claims have fallen in the past five weeks. Consistent reports under 400k have been welcomed in recent weeks, but it's still a long way to a solid recovery.
Additionally, the ADP National Employment Report stated that 325,000 private-sector jobs were added in December. Nevertheless, the real test for this week will be today's report on December's employment situation, including nonfarm payrolls and the latest unemployment rate. Economists are anticipating that payrolls will grow by 150,000, but that the overall unemployment rate does not exhibit much change. The official rate is currently 8.6%.
As stated in yesterday's column, the resistance which hit once again at 8:30 a.m. as the indices tested morning highs left the market set for a pullback into Thursday's opening bell, but without solid price development for a break in the larger 30 minute channel that had been forming week-to-date. Thursday's selling continued past the opening bell, but by 10:00 ET the indices were once again hitting support from premarket lows.
S&P 500 (Figure 2)
In addition to this week's employment data, the market had also been watching for December's retail sales as well on Thursday. Unfortunately, the data was not as reassuring as one might have hoped and many retailers saw their share prices slip. American Eagle Outfitter (AEO) fell 10.82%, Children's Place (PLCE) shares were lower by 6.58%), Gap (GAP) fell 3.23%, while Target (TGT) ended the session down 2.98%, and J.C. Penney fell 2.69%. Barnes & Noble (BKS) was one of the worst-hit though. It fell 17.05% after slashing its fiscal Q-3 guidance. The season was celebrated for its sharp retail discounts, which cut into profits. High-end retailer Nordstrom (JWN) (+1.06%) and teen retailer Zumiez (ZUMZ) (+17.55%) were among the few that beat estimates.
Despite the disappointing retail data, the market did manage to turn higher in early-morning trade. Intraday lows held between 9:45 a.m. ET and 10:00 ET and the market trended higher into 14:00 before striking resistance once again at the upper end of the 30-minute trading range. This range continued afterhours with another two-wave pullback on the 5 and 15 minute time frame (albeit more gradual than the one Thursday morning), and the market attempted to hold onto a more bullish bias and pulled higher into Friday morning after only a 62% Fibonacci retracement off highs.
The market is currently testing the upper end of the range heading into Friday's jobs data, but even though the action Thursday and into midnight was bullish, the pace of the upside throughout premarket trade shows hesitation. The market still has plenty of room for another swing higher on the 30-minute charts, but it's obvious that market participants are awaiting today's reports before jumping on board.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a loss of 2.72 points, or 0.02%, and closed at 12,415.70.Twelve of the Dow's thirty index components posted a gain. The strongest performers were the financials: Bank of America (BAC) (+8.61%) and JP Morgan (JPM) (+2.09%). These were followed by Disney (DIS) (+1.67%) and another financial: American Express (AXP) (+1.16%). The weakest were Boeing (BA) (-1.08%) and Chevron (CVX) (-0.98%).
The S&P 500 ($SPX) finished the session with a gain of 3.76 points, or 0.29%, and closed at 1,281.06. The top performing industry groups were financials (+1.4%) and consumer discretionary (+0.7%). The strongest individual percentage performers in the index were Bank of America (BAC) (+8.61%), LSI Corporation (LSI) (+7.72%), and Pulte Group (PHM) (+7.65%). The weakest industry groups were energy (-0.6%) and telecoms (-0.5%). The weakest individual performers were MetroPCS (PCS) (-8.87%), Tesoro Corp. (TSO) (-5.87%), and Marathon Pete. Corp. (MPC) (-5.45%).
The Nasdaq Composite ($COMPX) ended the session higher by 21.50 points, or 0.81%, on Wednesday and it closed at 2,648.36. The strongest performers in the Nasdaq-100 ($NDX) were Sirius XM Radio (SIRI) (+11.48%), Marvell Tech. Group (MRVL) (+7.33%), and Seagate Tech. (STX). The weakest were Netapp (NTAP) (-2.72%), CTrip.com (CTRP) (-2.41%), and Sears Holdings (SHLD) (-2.21%).
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.