Stock market bulls struggle as volume remains light

TUESDAY'S MARKET WRAP-UP

Market Snapshot for January 10, 2011 (10:30 p.m. ET):
Closing Prices: DOW 12,462.47 (+69.78, +0.56%), S&P 500 1,292.08 (+11.38, +0.89%), NASDAQ 2,702.50 (+25.94, +0.09%), Nikkei 225 8,422.26 (+31.91, +0.38%), DAX 6,162.98 (+145.75, +2.42%), FTSE 5,696.70 (+84.44, +1.50%)
OIL 102.17, GOLD 1,631.80, SILVER 29.90
EURO 1.2773, YEN 76.84, BRITISH POUND 1.548, U.S. DOLLAR INDEX 81.175


Upside continues, but...

After a jump start to kick off the New Year, which resulted in a solid opening gap to the upside last Tuesday, the market spent the remainder of the week trying to figure out what to do next. The week's congestion had a bias in favor of a bullish resolution, but the question was whether that resolution would be merely a trap for the bulls, or a solid upside breakout. So far, that question still remains.

Dow Jones Industrial Average (Figure 1)


The gains made so far this week have been thanks to the rally that began afterhours on Monday and continued throughout the evening and into Tuesday's opening bell. The steady buying, which held 15 minute 20 simple moving average support throughout, began to see a shift in momentum after 6:00 a.m. ET. By 8:30 a.m. ET the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI) futures had both experienced a second, slightly higher high in premarket trade and were pulling back once again just prior to the bell. A third slightly higher high followed when the 10:00 a.m. ET wholesale inventories data came out. The resulting pattern was a Momentum Reversal Short (TM) in the S&P 500 futures. This led to a selloff that lasted into the early afternoon and resumed at the 15:00 ET correction period and into afterhours trade. As expected, intraday buy setups were few and far between in the overall market and were primarily limited to 2-5 minute charts.

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