Market Snapshot for February 2, 2011 (7:52 p.m. ET), Closing Prices:
- DOW 12,705.41 (-11.05, -0.09%), S&P 500 1,325.54 (+1.45, +0.11%), NASDAQ 2,859.68 (+11.41 +0.4%), Nikkei 225 8,875.91 (-0.91, -0.01%), DAX 6,655.63 (+38.99, +0.59%), FTSE 5,796.07 (+5.35, +0.09%)
- OIL 96.59, GOLD 1,761.80, SILVER 34.30
- EURO 1.3122, YEN 76.20, BRITISH POUND 1.5791, U.S. DOLLAR INDEX 79.11
Thursday was not a particularly exciting day for the market. Volume was on the light side and the session was caught between the larger intraday time frame support and resistance levels I discussed in yesterday's column. The day kicked off after a pullback in premarket trade landed the indices at support from premarket congestion Wednesday morning (as shown on the 15 minute charts). This support zone held well and continued to do so even when the indices retested the level mid-day on Thursday.
Prior to that, however, the market attempted a recovery. After hitting lows around 7:45 a.m. ET, the indices continued higher past the 10:00 a.m. ET economic data and into the 11:00 a.m. ET correction period. The Nasdaq ($COMPX) once again served as the relative strength leader, but the pace of the strength began to diminish as the morning wore on.
Dow Jones Industrial Average (Figure 1)
The shifting momentum offered the bears a chance to take the lead and a short triggered intraday as the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI) tested the highs from early premarket trade. This slowdown in momentum also allowed the bears to develop a stronger reactionary move to the short trigger and the pace of the selling quickly returned the market to the premarket lows by early afternoon.
After striking lows for a second time on Thursday, the market faced a more difficult recovery challenge. A "V"-type of low and an inverted "V" high left the market in a range into the closing bell, but it increased the odds for a slowdown into the afternoon. Even though the market trended higher throughout the remainder of the regular trading session, the indices experienced a great deal of price overlap from one bar to the next on the five and fifteen minute time frames. This leaves the futures facing another challenge from the bears as we roll over into Friday's trade.
S&P 500 (Figure 2)
In and of itself, this is still not enough to confirm the start of a larger daily pullback, but the market is due for one. That makes this a good time to look for stocks with relative weakness or upside exhaustion for swingtrades on the short side. For example, O Reilly Automotive (ORLY) has been added to my list because it is showing slowing momentum on the weekly time frame and relative weakness over the past several weeks in addition to upside trend exhaustion. In the meantime, earnings reactions will continue to be a source for action heading into next week and will offer opportunities that will not rely as heavily on overall market direction as other index components.
The major event for the day on Friday will be January's employment data. Nonfarm payrolls are expected to have increased by 150,000 in January, while the unemployment rate is expected to remain unchanged at 8.5.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a loss of 11.05 points, or 0.09%, and closed at 12,705.41. Eleven of the Dow's thirty index components posted a gain. The top performers were Alcoa (AA) (+2.16%), Bank of America (BAC) (+1.22%), and American Express (AXP) (+1.07%). The top shares posting a loss were Disney (DIS) (-1.07%), Pfizer (PFE) (-0.94%), and Hewlett-Packard (HPQ) (-0.90%).
Next page: S&P, Nasdaq
The S&P 500 ($SPX) finished the session with a gain of 1.45 points, or 0.11%, and closed at 1,325.54. Out of the index's ten industry groups, the strongest were energy (+0.5%) and financials (+0.5%). The top declining sectors were materials (-0.5%) and health care (-0.4%). The top individual percentage performers in the index were Gap Inc. (GPS) (+10.64%), CMR Group (CME) (+8.36%), and Big Lots (BIG) (+8.27%). The top decliner was Abercrombie & Fitch Co. (ANF) (-13.73%), which lowered its earnings forecast. Ameriprise Financial (AMP) (-8.03%), and JDS Uniphase (JDSU) (-7.16%) were also among the day's top decliners.
The Nasdaq Composite ($COMPX) ended the session higher by 11.41 points, or 0.4%, on Thursday and it closed at 2,859.68. The strongest performer in the Nasdaq-100 ($NDX) was Green Mountain Coffee Roasters (GMCR). GMCR shares jumped 23.85% after it posted earnings of 60 cents a share (18 cents higher than the previous year) and revenue growth of 102%, beating the Street estimates. GMCR saw its share prices plummet from over $115 a share in September to under $35 by November last year. Other top performers included BMC Software (BMC) (+6.66%) and Electronic Arts (EA) (+6.13%). The weakest were Warner Chilcott (WCRX) (-2.78%) and CTrip (CTRP) (-2.57%). Both companies will continue to feel bearish pressure in the week ahead.
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.