December 7, 2011

An online version of this newsletter is available at http://www.tonihansen.com/Newsletters/current.html.

DAILY COMMENTARY

Fed Remains Steadfast (Note: Unless otherwise stated, the index action described below relates to the EMini 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.)

TUESDAY’S MARKET WRAP-UP

Market Snapshot for December 14, 2011 (2:15 a.m. ET): Closing Prices: DOW 11,954.94 (-66.45, -0.55%), SandP 500 1,225.73 (-10.74, -0.87%), NASDAQ 2,579.27 (-32.99, -1.26%), Nikkei 225 8,519.13 (-33.68, -0.39%), DAX 5,774.26 (-, -%), FTSE 5,490.15 (+62.29, +1.15%) OIL 99.90, GOLD 1,642.80, SILVER 30.975 EURO 1.3038,YEN 77.94, BRITISH POUND 1.5482, U.S. DOLLAR INDEX 80.275

Rates Unchanged Tuesday brought with it another Fed day, but as we’ve seen over the past several years, it hasn’t led to a great deal of change. In fact, the Fed once again left its key lending rates unchanged and its outlook equally demure. It seems that perhaps the market was looking for a greater glimmer of hope in the outlook though. The indices kicked off the session in positive territory, but resistance heading into the bell held and the gap closed by 11:15 ET. The mid-day price action remained bearish as the indices formed a two-wave continuation pattern mid-day to favor a break lower into the afternoon. This breakdown came with the Fed announcement.

Congestion Rules Last week in my column I focused a great deal upon intraday price action and the larger daily resistance that was hitting. As discussed, the slightly higher highs we were experiencing on the 30-minute time frame created a series of bull traps, which easily gave way to more rapid bursts of selling intraday. This price action also factored into Tuesday’s post-Fed move. Despite the morning gap on Tuesday morning, the indices were striking upside resistance within a 30-minute triangle that had formed as a result of the rapid downside flushes and slower upside within the last wave of the triangle heading into Tuesday morning added another pro to a breakdown bias. This created a two-wave sell pattern on this larger intraday time frame with the first wave up on the 9th and second wave up beginning mid-day on Monday.

Tuesday’s Index Wrap-up The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a loss of 66.45 points, or 0.55%, and closed at 11,954.94. Seven of the Dow’s thirty index components posted a gain on Tuesday. The top performers were Pfizer (PFE) (+1.81%), Microsoft (MSFT) (+0.98%), and Procter and Gamble (PG) (+0.65%). The weakest were Alcoa (AA) (-3.32%), Caterpillar (CAT) (-2.42%), and Bank of America (BAC) (-2.39%). The SandP 500 ($SPX) finished the session with a loss of 10.74 points, or 0.87%, and closed at 1,258.47. The strongest sector on Tuesday was the utilities, while the strongest individual percentage performers in the index Urban Outfitter (URBN) (+5.33%), Netapp (NTAP) (+2.13%), and MetroPCS Communication (PCS) (+1.91%). The weakest sectors were consumer discretionary (-2%), materials (-1.7%), and the financials, (-1.5%), while the weakest individual performers were Best Buy (BBY) (-15.46%), Harman Intl. Inds. (HAR) (-7.26%), and MEMC Electronic Materials (WFR) (-7.06%). The Nasdaq Composite ($COMPX) ended the session lower by 32.99 points, or 1.26%, on Tuesday and it closed at 2,579.27. The top index components in the Nasdaq-100 ($NDX) were Urban Outfitters (URBN) (+5.33%), NII Holdings (NIHD) (+2.81%), and Garmin (GRMN) (+2.18%). The weakest were Green Mountain Coffee (GMCR) (-11.58%), Sears Holdings (SHLD) (-5.12%), and Amazon.com (AMZN) (-4.75%).

OUTLOOK

We are likely to continue to see pressure on the bulls this week as well as the congestion continues to play out in the form of a larger daily correction off last week’s resistance zone. Since the market held October and November’s highs, however, this larger price pattern on the daily time frame is almost the mirror opposite of what we saw on the 30-minute charts and the indices are creating a second wave of correction off highs since October’s reversal. A two-wave buy strategy is developing on the daily charts as long as the momentum on this second wave of correction that began this month remains more gradual than the rally heading into this month.

ECONOMIC REPORTS AND EVENTS THIS WEEK

Dec 12 2:00 PM Treasury Budget Nov Dec 13 8:30 AM Retail Sales Nov Dec 13 8:30 AM Retail Sales ex-auto Nov Dec 13 10:00 AM Business Inventories Oct Dec 13 2:15 PM FOMC Rate Decision Dec Dec 14 7:00 AM MBA Mortgage Index 12/10 Dec 14 8:30 AM Export Prices ex-ag. Nov Dec 14 8:30 AM Import Prices ex-oil Nov Dec 14 10:30 AM Crude Inventories 12/10 Dec 15 8:30 AM Initial Claims 12/10 Dec 15 8:30 AM Continuing Claims 12/03 Dec 15 8:30 AM PPI Nov Dec 15 8:30 AM Core PPI Nov Dec 15 8:30 AM Empire Manufacturing Dec Dec 15 8:30 AM Current Account Balance Q3 Dec 15 9:00 AM Net Long-Term TIC Flows Oct Dec 15 9:15 AM Industrial Production Nov Dec 15 9:15 AM Capacity Utilization Nov Dec 15 10:00 AM Philadelphia Fed Dec Dec 16 8:30 AM CPI Nov Dec 16 8:30 AM Core CPI Nov International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Dec 11 CNY New Yuan Loans (NOV)*** Dec 11 19:30 AUD Home Loans (OCT) Dec 11 19:30 AUD Trade Balance (OCT) Dec 12 JPY Consumer Confidence (NOV) Dec 12 NZD Westpac NZ Consumer Confidence (4Q) Dec 12 NZD REINZ House Sales (NOV) Dec 12 01:00 JPY Machine Tool Orders (NOV P) Dec 12 14:00 USD Monthly Budget Statement (NOV) Dec 12 18:50 JPY Tertiary Industry Index (OCT) Dec 12 19:01 GBP RICS House Price Balance (NOV) Dec 12 19:30 AUD Dwelling Starts (3Q) Dec 12 19:30 AUD NAB Business Confidence (NOV) Dec 13 GBP Nationwide Consumer Confidence (NOV) Dec 13 01:45 CHF SECO December 2011 Economic Forecasts Dec 13 04:30 GBP Consumer Price Index (NOV) *** Dec 13 04:30 GBP Core Consumer Price Index (NOV) *** Dec 13 05:00 EUR German ZEW Survey (Current Situation) (DEC) Dec 13 05:00 EUR Euro-Zone ZEW Survey (Economic Sentiment) (DEC) Dec 13 05:00 EUR German ZEW Survey (Economic Sentiment) (DEC) *** Dec 13 08:30 USD Advance Retail Sales (NOV)*** Dec 13 08:30 USD Retail Sales Less Autos (NOV) Dec 13 08:30 USD Retail Sales Ex Auto and Gas (NOV) Dec 13 14:15 USD Federal Open Market Committee Rate Decision (DEC 13) *** Dec 13 18:30 AUD Westpac Consumer Confidence (DEC) Dec 13 23:30 JPY Industrial Production (OCT F) Dec 14 CNY Actual FDI (NOV) Dec 14 03:15 CHF Producer and Import Prices (NOV) Dec 14 04:30 GBP Claimant Count Rate (NOV) Dec 14 04:30 GBP Jobless Claims Change (NOV) Dec 14 04:30 GBP Weekly Earnings exBonus 3M/YoY (OCT) Dec 14 04:30 GBP ILO Unemployment Rate (3M) (OCT) Dec 14 05:00 EUR Euro-Zone Industrial Production w.d.a. (OCT) Dec 14 05:00 CHF ZEW Survey (Expectations) (DEC) Dec 14 08:30 CAD Leading Indicators (NOV) Dec 14 18:50 JPY Tankan Large Manufacturers Index (4Q) Dec 14 18:50 JPY Tankan Non-Manufacturing Index (4Q) Dec 14 18:50 JPY Tankan Large Manufacturers Outlook (4Q) *** Dec 14 18:50 JPY Tankan Non-Manufacturing Outlook (4Q) Dec 14 18:50 JPY Tankan Large All Industry Capex (4Q) Dec 15 01:00 JPY Machine Tool Orders (NOV F) Dec 15 03:15 CHF Industrial Production (3Q) ( Dec 15 03:30 EUR German Purchasing Manager Index Manufacturing (DEC A) Dec 15 03:30 EUR German Purchasing Manager Index Services (DEC A) Dec 15 03:30 CHF Swiss National Bank Rate Decision (DEC 15) *** Dec 15 04:00 EUR ECB Publishes Dec. Monthly Report*** Dec 15 04:00 EUR Euro-Zone Purchasing Manager Index Composite (DEC A) Dec 15 04:00 EUR Euro-Zone Purchasing Manager Index Manufacturing (DEC A) Dec 15 04:00 EUR Euro-Zone Purchasing Manager Index Services (DEC A) Dec 15 04:30 GBP BoE/GfK Inflation Next 12 Mths (NOV)*** Dec 15 04:30 GBP Retail Sales (NOV) Dec 15 04:30 GBP Retail Sales w/Auto Fuel (NOV) Dec 15 05:00 EUR Euro-Zone Consumer Price Index – Core (NOV)*** Dec 15 05:00 EUR Euro-Zone Consumer Price Index (NOV)*** Dec 15 05:00 EUR Euro-Zone Employment (3Q) Dec 15 08:30 USD Producer Price Index (NOV) Dec 15 08:30 USD Producer Price Index Ex Food and Energy (NOV) Dec 15 09:00 USD Net Long-term TIC Flows (OCT) Dec 15 09:15 USD Industrial Production (NOV) Dec 16 08:30 USD Consumer Price Index (NOV)*** Dec 16 08:30 USD Consumer Price Index Ex Food and Energy (NOV)*** Dec 16 08:30 USD Consumer Price Index n.s.a. (NOV) Dec 16 08:30 USD Consumer Price Index Core Index s.a. (NOV) *** Highly influentialNotice: The Bastiat Group, Inc. has attempted to verify the information contained in this calendar, however, any aspect of such info may change without notice. Foreign economic reports included in this list are only those deemed medium to high impact.

KEY EARNINGS ANNOUNCEMENTS THIS WEEK

Monday, Dec 12, 2011 Before: NX During: – After: JRJC, DITC, FCEL, IDT, IRET, PPHM, SEH, SURG Tuesday, Dec 13, 2011 Before: BBY, FDS During: – After: ABM, LTRE Wednesday, Dec 14, 2011 Before: PTRY, SYNO During: MDTH After: ALCO, APOG, MCC, NDSN, PAY, WPCS Thursday, Dec 15, 2011 Before: AEY, BRLI, DFS, FDX, IPSU, MCS, PIR, RAD, TPLM During: RTK After: ACN, ADBE, RIMM Friday, Dec 16, 2011 Before: – During: – After: AIR Note: All economic numbers and earnings reports are in line with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column and some companies have not confirmed their time, so always double check when taking positions overnight during earnings season! (?) = Not yet confirmed at the time the list was compiled.

DISCLAIMER

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