Market Snapshot for February 6, 2011 (5:50 p.m. ET); Closing Prices:
- DOW 12,845.13 (-17.10, -0.13%), S&P 500 1,344.33 (-0.57, -0.04%), NASDAQ 2,901.99 (-3.67, -0.13%), Nikkei 225 8,929.20 (-, -%), DAX 6,764.83 (-1.84, -0.03%), FTSE 5,892.20 (-8.87, -0.15%)
- OIL 96.91, GOLD 1,724.90, SILVER 33.675
- EURO 1.312, YEN 76.55, BRITISH POUND 1.5814, U.S. DOLLAR INDEX 79.185
Monday was a slow day on Wall Street. And by "slow", I mean one of the slowest non-holiday trading days we've seen in about a decade. The market put in a strong performance on Friday after a favorable reaction to last month's employment data. The U.S. economy added 243,000 new positions in January, while the unemployment rate dropped to 8.3%. The data surge put the indices squarely at resistance by rapidly establishing an equal move compared to Wednesday's morning rally.
By 10:15 a.m. ET most of the gains for the day were already established and the market began to struggle. Even though the indices finished the week at highs, trading in the second half of the morning and the entire afternoon on Friday shifted the momentum of the morning rally and created an exhaustion pattern heading into the weekend.
Dow Jones Industrial Average (Figure 1)
The index futures opened lower Sunday evening with Greece once again holding the headlining position. The country once again failed to meet a deadline to negotiate its debt. The news, however, was unsurprising and the pullback into the new week was more likely a technical measure than one driven by this "revelation".
The breakdown into Sunday evening was mirrored in early trade Monday morning before the indices finally struck stronger support at 4:00 a.m. ET. Two-wave corrections are common in the market and the second move brought the futures into a 50% retracement zone as the market took back half the gains from Friday's employment run. After striking support, however, the market lacked direction and floundered along throughout most of the session.
Although the predominant intraday trend was higher, the move was marked by choppy trade and a lack of decent reward to risk ratios in index-centered strategies. The market was also short on strong intraday movers in individual stocks for those that did pull away from index trading alone.
The forex market offered more to market participants throughout the morning than the indices overall and was one of the best outlets for intraday traders for the day, but forex action died down after 13:00 ET.
S&P 500 (Figure 2)
Index Wrap-up
The Dow Jones Industrial Average ($DJI) ended the day on Monday with a loss of 17.10 points, or 0.13%, and closed at 12,845.13. Eleven of the Dow's thirty index components posted a gain. The top performers were Bank of America (BAC) (+1.66%), Procter & Gamble (PG) (+1.18%), and Disney (DIS) (+1.15%). The weakest performers were Travelers (TRV) (-1.31%), Pfizer (PFE) (-1.18%), and Boeing (BA) (-1.15%).
The S&P 500 ($SPX) finished the session with a loss of 0.57 points, or 0.04%, and closed at 1,344.33. The only two industry groups to post gains were energy (+1.1%) and telecoms (+0.3%). The top individual percentage performers in the index were Abercrombie & Fitch (ANF) (+9.48%), Sprint Nextel (S) (+6.03%), and Best Buy (BBY) (+3.39%). The weakest industry groups were financials (-0.5%) and materials (-0.5%). The top individual decliners were Medco Health Solutions (MHS) (-8.08%), Humana (HUM) (-5.40%), and Express Scripts (ESRX) (-4.65%). MHS and ESRX shares fell on a report that the Federal Trade Commission could be gathering evidence to prevent Express Scripts' planned purchase of Medco Health. Humana's (HUM) earnings were in line with estimates, but revenue fell short of expectations.
The Nasdaq Composite ($COMPX) ended the session lower by 3.67 points, or 0.13%, on Monday and it closed at 2,901.99. The strongest performers in the Nasdaq-100 ($NDX) were Green Mountain Coffee Roasters (GMCR) (+4.24%), Vertex Pharmaceuticals (VRTX) (+4.00%), and First Solar (FSLR) (+2.97%). The weakest were Express Scripts (ESRX) (-4.65%), Micron Tech. (MU) (-2.89%), and Expeditors Intl. (EXPD) (-2.45%).
Nasdaq Composite (Figure 3)
As we head into Tuesday, the market is still failing to develop a larger daily reversal pattern despite the upside extension. We'll need more than a two-wave correction on the 15 minute time frame and a break in the 20 day moving averages to confirm. So far the Nasdaq has held its 10-day moving average since December and the S&P 500 and Dow have only broken their 10-day moving averages once. New swingtrades (multi-day strategies) will again be higher risk to initiate than daytrades at this time.
This week is not a particularly busy one for economic data, but some names to watch for earnings on Tuesday will be Coca-Cola (KO), BP (BP), Hartford Financial (HAR), Disney (DIS), and Panera Bread (PNRA).
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.
