MONDAY'S MARKET WRAP-UP
Market Snapshot for January 30, 2011 (4:47 p.m. ET):
Closing Prices: DOW 12,653.72 (-6.74, -0.05%), S&P 500 1,313.01 (-3.32, -0.25%), NASDAQ 2,811.94 (-4.61 -0.16%), Nikkei 225 8,793.05 (-48.17, -0.54%), DAX 6,444.45 (-67.53, -1.04%), FTSE 5,671.09 (-62.36, -1.09%)
OIL 98.96, GOLD 1,729.20, SILVER 33.45
EURO 1.3141, YEN 76.33, BRITISH POUND 1.5708, U.S. DOLLAR INDEX 79.225
Dow Jones Inds. and S&P 500 Hit 20-Day SMA
The Dow Jones Ind. Average ($DJI) and S&P 500 ($SPX) pulled back to their 20-day moving average zones for the first time in approximately six weeks on Monday. Friday's weakness was followed by a second round of selling heading into Monday morning after weakness overseas led to a strong downside gap into the opening bell. The gap alone nearly brought the indices to this support level and the fact that both indices had closed in the zone of their 10-day moving averages left the market experiencing wider-than-average opening losses to begin the session.
The market overall has a tendency to want to close larger-than-average gaps except in circumstances where the gap itself triggers a daily or weekly setup, such as a trading range breakdown. Since the momentum of the selling between Friday's highs and Monday's open, however, was not stronger-than-average, the break in the 10-day moving average alone was not enough to trigger a larger daily sell signal as opposed to merely a smaller 15-time time frame correction within the context of the larger trend.
Dow Jones Industrial Average (Figure 1)
The market found support early on in Monday's session, making only slightly lower lows out of the opening bell. These lows established a stronger test of the 20-day moving averages in the Dow and S&P and brought the Nasdaq-100 into support of its own at its 10-day moving average. This was the second time this year that the Nasdaq has struck that support level. As the strongest of the three major indices, it had the easiest time recovering the weekend losses and closed its gap zone by noon.
A minor pullback mid-day created a continuation pattern that was followed by further buying into Monday afternoon. This took the Nasdaq back to Friday's highs and brought the Dow and S&P 500 to its 5 minute and 15 minute 200 period moving averages. They held this resistance level into the close, but remained bullish afterhours and made up more of its losses prior to Tuesday's opening bell. The "V" reversal that took place off Monday's lows in the indices keeps the daily uptrend in play, but it will make last week's highs a strong resistance level for both the Dow and S&P 500.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Monday with a loss of 6.74 points, or 0.05%, and closed at 12,653.72. Twelve of the Dow's thirty index components posted a gain. The top performers were Microsoft (MSFT) (+1.30%), Verizon (VZ) (+1.07%), and IBM (IBM) (+1.07%). The top percentage losers were Bank of America (BAC) (-3.02%), Procter & Gamble (PG) (-1.70%), and American Express (AXP) (-1.46%).
The S&P 500 ($SPX) finished the session with a loss of 3.32 points, or 0.25%, and closed at 1,313.01. Out of the index's ten industry groups, only telecoms (+0.6%) and technology (+0.3%) posted gains. The weakest sector was the financials (-1.0%). The top individual percentage performers in the index were Nabors Industries (NBR) (+3.51%), Interpublic Group (IPG) (+2.45%), and Monsanto Co. (MON) (+2.19%). The top decliners were Gannett Inc. (GCI) (-6.90%), Staples Inc. (SPLS) (-4.87%), and CBRE Group (CBG) (-4.25%).
The Nasdaq Composite ($COMPX) ended the session lower by 4.61 points, or 0.16%, on Monday and it closed at 2,811.94. The strongest performers in the Nasdaq-100 ($NDX) on Friday were Verisign (VRSN) (+2.18%), Micron Technology (MU) (+1.75%), and Nuance Communications (NUAN) (+1.65%). The weakest were CTrip.com Intl. (CTRP) (-5.68%), Staples Inc. (SPLS) (-4.87%), and First Solar (FSLR) (-3.82%).
Nasdaq Composite (Figure 3)
Housing Data Disappoints
The morning's big data ahead of the open was the Standard & Poor's/Case-Schiller home-price index at 9:00 a.m. ET. The market has been looking for further evidence of incoming stability and a bottom in the housing crash, but Tuesday's data did not help bolster those hopes. U.S. home prices fell in nearly all of the cities tracked by the index. This marks the third straight monthly loss. Out of the 20 cities in the index, only Washington and Detroit posted year-over-year increases. The market did not react to the news.
Later this morning, watch for the Chicago PMI, followed by January's consumer confidence report.
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.