Market Snapshot for January 11, 2011 (10:30 p.m. ET):
- DOW 12,449.45 (-13.02, -0.1%), S&P 500 1,292.48 (+0.4, +0.03%), NASDAQ 2,710.76 (+8.26, +0.31%), Nikkei 225 8,369.53 (-78.35, -0.93%), DAX 6,152.34 (-10.64, -0.17%), FTSE 5,670.82 (-25.88, -0.45%)
- OIL 101.24, GOLD 1,643.80, SILVER 29.995
- EURO 1.2717, YEN 76.86, BRITISH POUND 1.5309, U.S. DOLLAR INDEX 81.52
It's been a tough couple of weeks!
As much as I'd love to say how wonderful the market has been so far this year, it's actually been a more difficult time. This is particularly true for daytraders. Light volume, strong resistance, and global uncertainty has led to a lack of conviction intraday for the better part of many of the recent sessions. This can be witnesses in the narrower trading ranges since late December and the greater degree of overlap from one bar to the next on 5 minute, 15 minute, and even daily time frames.
The result of this type of action is the need to lower reward expectations compared to risk. Where the market often gave setups of 2:1 reward to risk or higher, many traditional technical patterns are now offering 1:1 or less! There are of course exceptions, but lately many of those have taken place outside regular market hours. Few days, however, have been as difficult as Wednesday's.
Dow Jones Industrial Average (Figure 1)
Once again, the strongest price moves took place outside regular market hours. A solid buy triggered into the start of the day just past midnight when the weakness from the previous session hit support and momentum shifted into the start of the new day. The index futures steadily retraced the prior afternoon's losses, and, although the pace was still more gradual than the previous morning, the narrow channel into premarket highs meant better reward potential for a reversal. This reversal off those highs began several hours prior to the New York open.
The market was already reacting to support by the time the opening bell rang on Wednesday morning and the indices moved higher throughout the day, but the higher degree of overlap (as seen on the 5 and 15 minute charts) continued to make things more tricky than usual. Technical setups did hold (witness the Dow's price action), but the session felt more like a pre-holiday session than one taking place more than a week past the new year.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Wednesday with a loss of 13.02 points, or 0.1%, and closed at 12,449.45. Just under half of the Dow's thirty index components posted a gain. The strongest performers were Bank of America (BAC) (+3.62%), Alcoa (AA) (+2.01%), and JP Morgan (JPM) (+1.69%). The weakest were Disney (DIS) (-2.35%), Coca-Cola (KO) (-1.85%), and Chevron (CVX) (-1.18%).
The S&P 500 ($SPX) finished the session with a gain of 0.4 points, or 0.03%, and closed at 1,292.48. The top performing industry groups were once again the financials (+1.0%) and materials (+1.0%). The strongest individual percentage performers in the index were Sears Holdings Corp. (SHLD) (+8.01%), First Solar (FSLR) (+7.82%), and Genworth (GNW) (+7.29%). Losses were the largest in energy (-1.3%). The weakest were Urban Outfitters (URBN) (-18.63%), SuperValu (SVU) (-12.51%), and Cabot Oil & Gas (COG) (-11.16%).
The Nasdaq Composite ($COMPX) ended the session higher by 8.26 points, or 0.31%, on Wednesday and it closed at 2,710.76. The strongest performers in the Nasdaq-100 ($NDX) were Sears Holdings Corp. (SHLD) (+8.01%), First Solar (FSLR) (+7.82%), and Wynn Resorts (WYNN) (+4.05%). The weakest were Netflix (NFLX) (-3.84%), Monster Beverage Corp. (MNST) (-2.99%), and Marvell Technology Group (MRVL) (-2.24%).
Nasdaq Composite (Figure 3)
We should start to see things pick up here as early as Thursday. Initial jobless claims, retail sales for the past month, and November's business inventory data are just a few of the headlines the market will be following. The European Central Bank will also be releasing its latest interest rate decision.
As far as a technical bias is concerned, there isn't much at this point to change my outlook compared to yesterday. The bulls still need to be more cautious and intraday momentum shifts should be closely monitored since the daily time frames have room to offer a strong 60-minute swing either way. This will depend upon how the channel of the past two weeks breaks. Slower downside momentum followed by a break in the upper channel will allow the market to move more securely to prior highs, but if the market holds a slightly higher high once again on the 60-minute charts, particularly if it slows into that high, then we have a better chance of seeing a Momentum Reversal (TM) trigger. This would lead to another rapid drop on the daily charts.
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.