TUESDAY'S MARKET WRAP-UP
Market Snapshot for January 24, 2011 (7:16 p.m. ET):
Closing Prices: DOW 12,675.75 (-33.07, -0.26%), S&P 500 1,314.65 (-1.35, -0.1%), NASDAQ 2,786.64 (+2.47, +0.09%), Nikkei 225 8,823.01 (+37.68, +0.43%), DAX 6,419.22 (-17.40, -0.27%), FTSE 5,751.90 (-30.66, -0.53%)
OIL 99.17, GOLD 1,666.50, SILVER 32.125
EURO 1.4042, YEN 77.79, BRITISH POUND 1.5635, U.S. DOLLAR INDEX 80.025
Earnings have been one of the session's highlights. Among the blue chips posting earnings, Johnson & Johnson (JNJ), DuPont (DD), and McDonald's (MCD) all beat expectations, while Travelers (TRV) and Verizon (VZ) fell short. JNJ and DD both had a lack-luster session with DD opening lower only to recover those losses late in the morning. MCD, TRV, and VZ all had dismal opens and sold off sharply to begin the session before giving way to stagnant trade like most of the market throughout the remainder of the day.
Unlike most of Monday's earnings announcements, Apple (APPL) went gonzo afterhours on news that it reported a 118% gain in net income as well as a 73% gain in revenue for its first fiscal quarter. The index futures were up sharply following the announcement, but fell apart once again with the European open. Europe just can't shake the burden of it's crisis countries and Greece has once again taken the spotlight with fears that it could miss spring bond payments. Additionally, the International Monetary Fund cut its 2012 global growth outlook to 3.3% from 4% last September.
Dow Jones Industrial Average (Figure 1)
Today the Fed will be wrapping up a two-day policy meeting and will announce its latest interest rate policy this afternoon. This is expected to remain unchanged, but what will change is that for the first time ever, the Federal Reserve will include an outlook on interest rates in its policy announcement. We should see the market react strongly intraday following the news with wider swings like we had seen in past years when rates were more subject to change.
The typical Fed reaction is usually in two sets of three reactionary waves on two time frames. The first is on the 1-2 minute time frames with an initial reaction, a secondary reaction, and then a third counter move. It is not uncommon to see the second reaction play out more strongly than the first. This entire set of three waves then creates the first wave of a larger set on the 5 minute time frame. This larger set is easier to trade, particularly the second and third waves, because by that time things have started to slow down a bit.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a loss of 33.07 points, or 0.26%, and closed at 12,675.75. A third of the Dow's thirty index components posted a gain. The strongest performers were United Technologies (UTX) (+1.20%), IBM (IBM) (+1.03%), and WalMart (WMT) (+0.79%). The losers were Travelers (TRV) (-3.80%), McDonald's (MCD) (-2.18%), and Verizon (VZ) (-1.59%).
The S&P 500 ($SPX) finished the session with a loss of 1.35 points, or 0.1%, and closed at 1,314.65. The top performing industry groups were consumer discretionary (+0.04%), health care (+0.1%), and technology (+0.1%), while the weakest were the financials (-0.2%), energy (-0.3%), and consumer staples (-0.4%). The top individual percentage performers were Waters Corp. (WAT) (+7.97%), Quest Diagnostics (DGX) (+7.49%), and EMC Corp. (EMC) (+7.25%). The top decliners were Zions Bancorporation (-7.55%), Cablevision Sys. Corp. (CVC) (-4.13%), and Travelers (TRV) (-3.80%).
The Nasdaq Composite ($COMPX) ended the session higher by 2.47 points, or 0.09%, on Tuesday and it closed at 2,786.64. The strongest performers in the Nasdaq-100 ($NDX) were Green Mountain Coffee (GMCR) (+4.44%), Autodesk (ADSK) (+3.32%), and Life Technologies (LIFE) (+3.09%). The weakest were Research In Motion (RIMM) (-3.53%), Sears Holdings (SHLD) (-3.40%), and Warner Chilcott (WCRX) (-3.23%).
Nasdaq Composite (Figure 3)
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.