February 3, 2011
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DAILY COMMENTARY
Lathargic Thursday (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.)
THURSDAY’S MARKET WRAP-UP
Market Snapshot for February 2, 2011 (7:52 p.m. ET): Closing Prices: DOW 12,705.41 (-11.05, -0.09%), SandP 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
Market Struggles Between Support and Resistance Zones Intraday 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 ($COMPX) once again served as the relative strength leader, but the pace of the strength began to diminish as the morning wore on.
The shifting momentum offered the bears a chance to take the lead and a short triggered intraday as the SandP 500 ($SPX) and Dow Jones Ind. Average ($DJI) tested the highs from early premarket trade. This slowdown in momentum also allowed the bears to develop a stronger reactionary move to the short trigger and the pace of the selling quickly returned the market to the premarket lows by early afternoon. After striking lows for a second time on Thursday, the market faced a more difficult recovery challenge. A “V”-type of low and an inverted “V” high left the market in a range into the closing bell, but it increased the odds for a slowdown into the afternoon. Even though the market trended higher throughout the remainder of the regular trading session, the indices experienced a great deal of price overlap from one bar to the next on the five and fifteen minute time frames. This leaves the futures facing another challenge from the bears as we roll over into Friday’s trade.
In and of itself, this is still not enough to confirm the start of a larger daily pullback, but the market is due for one. That makes this a good time to look for stocks with relative weakness or upside exhaustion for swingtrades on the short side. For example, O Reilly Automotive (ORLY) has been added to my list because it is showing slowing momentum on the weekly time frame and relative weakness over the past several weeks in addition to upside trend exhaustion. In the meantime, earnings reactions will continue to be a source for action heading into next week and will offer opportunities that will not rely as heavily on overall market direction as other index components. The major event for the day on Friday will be January’s employment data. Nonfarm payrolls are expected to have increased by 150,000 in January, while the unemployment rate is expected to remain unchanged at 8.5.
INDEX WRAP-UP
The Dow Jones Industrial Average ($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%). The SandP 500 ($SPX) finished the session with a gain of 1.45 points, or 0.11%, and closed at 1,325.54. Out of the index’s ten industry groups, the strongest were energy (+0.5%) and financials (+0.5%). The top declining sectors were materials (-0.5%) and health care (-0.4%). The top individual percentage performers in the index were Gap Inc. (GPS) (+10.64%), CMR Group (CME) (+8.36%), and Big Lots (BIG) (+8.27%). The top decliner was Abercrombie and Fitch Co. (ANF) (-13.73%), which lowered its earnings forecast. Ameriprise Financial (AMP) (-8.03%), and JDS Uniphase (JDSU) (-7.16%) were also among the day’s top decliners. The Nasdaq Composite ($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.
ECONOMIC REPORTS AND EVENTS THIS WEEK
U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Jan 31 8:30 AM Employment Cost Index Q4 Jan 31 9:00 AM Case-Shiller 20-city Index Nov Jan 31 9:45 AM Chicago PMI Jan Jan 31 10:00 AM Consumer Confidence Jan Feb 1 7:00 AM MBA Mortgage Index 01/28 Feb 1 8:15 AM ADP Employment Change Jan Feb 1 10:00 AM ISM Index Jan Feb 1 10:00 AM Construction Spending Dec Feb 1 10:30 AM Crude Inventories 01/28 Feb 1 2:00 PM Auto Sales Jan Feb 1 2:00 PM Truck Sales Jan Feb 2 7:30 AM Challenger Job Cuts Jan Feb 2 8:30 AM Initial Claims 01/28 Feb 2 8:30 AM Continuing Claims 01/21 Feb 2 8:30 AM Productivity-Prel Q4 Feb 2 8:30 AM Unit Labor Costs Q4 Feb 3 8:30 AM Nonfarm Payrolls Jan Feb 3 8:30 AM Nonfarm Private Payrolls Jan Feb 3 8:30 AM Unemployment Rate Jan Feb 3 8:30 AM Hourly Earnings Jan Feb 3 8:30 AM Average Workweek Jan Feb 3 10:00 AM Factory Orders Dec Feb 3 10:00 AM ISM Services Jan International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Jan 31 EUR German Consumer Price Index (JAN P)*** Jan 31 00:00 JPY Annualized Housing Starts (DEC) Jan 31 00:00 JPY Housing Starts (DEC) Jan 31 EUR German Retail Sales (DEC) Jan 31 02:00 CHF UBS Consumption Indicator (DEC) Jan 31 03:55 EUR German Unemployment Change (JAN)*** Jan 31 03:55 EUR German Unemployment Rate s.a. (JAN) Jan 31 04:30 GBP Net Consumer Credit (DEC) Jan 31 04:30 GBP Net Lending Sec. on Dwellings (DEC) Jan 31 04:30 GBP Mortgage Approvals (DEC) Jan 31 05:00 EUR Euro-Zone Unemployment Rate (DEC) Jan 31 08:30 CAD Gross Domestic Product (NOV)*** Jan 31 10:00 USD Consumer Confidence (JAN) Jan 31 17:30 AUD AiG Performance of Manufacturing Index (JAN) Jan 31 19:00 AUD HIA New Home Sales (DEC) Jan 31 19:30 AUD House Price Index (4Q) Jan 31 20:00 CNY PMI Manufacturing (JAN)*** Jan 31 20:30 JPY Labor Cash Earnings (DEC) Feb 01 02:00 GBP Nationwide House Prices n.s.a. (JAN) Feb 01 03:15 CHF Retail Sales (Real) (DEC) Feb 01 03:30 CHF SVME-Purchasing Managers Index (JAN) Feb 01 03:55 EUR German Purchasing Manager Index Manufacturing (JAN F) Feb 01 04:00 EUR Euro-Zone Purchasing Manager Index Manufacturing (JAN F) Feb 01 04:30 GBP Purchasing Manager Index Manufacturing (JAN) Feb 01 05:00 EUR Euro-Zone Consumer Price Index Estimate (JAN) Feb 01 08:15 USD ADP Employment Change (JAN) Feb 01 10:00 USD Construction Spending (DEC) Feb 01 10:00 USD ISM Manufacturing (JAN)*** Feb 01 10:00 USD ISM Prices Paid (JAN) Feb 01 19:30 AUD Trade Balance (DEC) Feb 02 02:00 CHF Trade Balance (DEC) Feb 02 04:30 GBP Purchasing Manager Index Construction (JAN) Feb 02 05:00 EUR Euro-Zone Producer Price Index (DEC)*** Feb 02 10:00 USD Fed’s Bernanke Testifies Before House Budget Committee*** Feb 02 17:30 AUD AiG Performance of Service Index (JAN) Feb 02 20:00 CNY China Non-manufacturing PMI (JAN) Feb 03 USD ICSC Chain Store Sales (JAN) Feb 03 CNY Industrial Profits YTD (DEC) Feb 03 02:00 CHF UBS Real Estate Bubble Index (4Q) Feb 03 03:55 EUR German Purchasing Manager Index Services (JAN F) Feb 03 04:00 EUR Euro-Zone Purchasing Manager Index Composite (JAN F) Feb 03 04:00 EUR Euro-Zone Purchasing Manager Index Services (JAN F) Feb 03 04:30 GBP Purchasing Manager Index Services (JAN) Feb 03 05:00 EUR Euro-Zone Retail Sales (DEC)*** Feb 03 07:00 CAD Unemployment Rate (JAN)*** Feb 03 07:00 CAD Net Change in Employment (JAN)*** Feb 03 07:00 CAD Full Time Employment Change (JAN) Feb 03 07:00 CAD Part Time Employment Change (JAN) Feb 03 07:00 CAD Participation Rate (JAN) Feb 03 08:30 USD Change in Non-farm Payrolls (JAN)*** Feb 03 08:30 USD Change in Private Payrolls (JAN) Feb 03 08:30 USD Change in Manufacturing Payrolls (JAN) Feb 03 08:30 USD Unemployment Rate (JAN)*** Feb 03 08:30 USD Avg Hourly Earning All Employees (JAN) Feb 03 08:30 USD Avg Weekly Hours All Employees (JAN) Feb 03 08:30 Underemployment Rate (U6) (JAN) Feb 03 10:00 USD ISM Non-Manufacturing Composite (JAN) Feb 03 10:00 USD Factory Orders (DEC) *** Highly influential Notice: 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, Jan 30, 2012 Before: ARW, CAJ, CFFN, CHFC, GCI, HAE, PHG, KYO, ONB, SIFY, TNB, WEN, WWW During: PEBK After: BIRT, AEIS, ALGN, ARRY, BMTC, EEQ, EEP, FFCH, FIBK, GGG, HTLF, HOLX, ICUI, IDTI, KRC, MCK, MSPD, NAVR, OLN, OFG, PRXL, PXLW, PCL, RGA, RCII, RTEC, SLG, SOA, SCMF, SFG, TGI Tuesday, Jan 31, 2012 Before: AXE, ADM, ARMH, AVY, BIIB, CPLP, CE, CEVA, CIT, CNH, DHR, LLY, ETR, XOM, FHCO, GKSR, GNTX, HRS, HHS, HW, HP, HMC, ITW, KLIC, LLL, LXK, MKTAY, HZO, MAT, MHP, OSK, PCAR, PNR, PFE, PCH, RTIX, SAIA, TECH, TLAB, TYC, UPS, X, VLO, WDR During: EOC, ENI After: ACE, AFL, AFOP, AMZN, AMCC, AJG, AZPN, BHLB, BBOX, BXP, BRCM, CHRW, BCR, CYT, DLB, EXAR, FFIC, FTNT, GLAD, GFF, HLIT, HA, ILMN, IVAC, INYS, JKHY, JDAS, JLL, KTCC, KEYN, LFL, MANH, MTW, MPW, MTH, MSL, MWA, MTGN, NATI, PSEM, PLT, QGEN, RSYS, STX, SLGN, STLY, UBNT, UIS, VRTU, WBSN, WRB Wednesday, Feb 1, 2012 Before: AET, ASCA, AOL, ATMI, AUDC, ALV, BEAV, BOKF, BBNK, GIB, CVLT, COCO, DSPG, ENR, ENTG, EPD, BEN, HFWA, HSY, HVB, IACI, ITG, KFFG, LQDT, MAN, MDCI, MGAM, NDAQ, NI, NOC, OIIM, PGC, RDWR, ST, SU, TMO, TUP, VHS, WHR During: CCNE, MRO After: ADEP, ABCO, ALGT, ALL, DOX, AFG, AMP, AIZ, ATW, AVB, AVNW, BYI, SAN, BMC, CELL, CBT, CACI, CDNS, CRME, CVCY, CMG, COHU, CNQR, CLB, CMRE, CVTI, CCK, EA, EXXI, EQR, EXPO, FBHS, FXCB, GAIN, GMCR, GTAT, HAIN, HWKN, HI, ININ, ISH, ISIL, JDSU, JBSS, KMPR, LVS, MX, MDU, MEAS, MERU, MKSI, NQ, NWK, NEU, OTEX, OPWV, QCOM, QNST, RLD, REG, RBNF, SWM, SHOR, SFLY, SYA, TSO, TTEK, TSCO, TRH, VASC Thursday, Feb 2, 2012 Before: ACM, AGN, ADS, ATK, AZN, BWINB, BZH, BHE, BX, BSX, CAM, CAH, CSL, CI, CME, CMI, DB, DO, DHX, DOW, EXP, RDEN, EVR, GR, IBCP, IP, IVC, K, KELYA, KEM, KNSY, LSTR, LEA, LII, MDC, MA, MMS, MD, MRK, MTOR, MSCI, NOV, NCI, NTWK, NYT, NUS, ODFL, PTEN, PENN, PHM, RSTI, ROP, RCL, RGLD, R, SBH, SLE, SNA, SNE, SE, HOT, SPH, SXC, SYNL, TE, TEN, BCO, TDW, TRCR, VIAB, WBC, WEC, XEL During: BOFI After: APKT, BEBE, BKH, BRS, CLMS, CPT, CATM, CFN, CVCO, CAVM, COLM, CNW, CTCT, BAP, CYMI, DRIV, EW, EXTR, FISV, FLXS, GNW, GIGA, GILD, HPOL, IKAN, INFN, IN, IRF, ITI, XXIA, KEX, BOOT, MCHP, MAA, MTX, MTSC, MFLX, NFG, N, NSR, EGOV, NVLS, OCLS, OPLK, OESX, PCCC, PKI, POWI, PWER, PFG, RDK, SIGI, SIMG, SIMO, SSD, SMT, SPAN, SRCL, TTWO, TSYS, EDE, THQI, TRMB, USLM, UTI, VR, VRTX, WSTG, WHG, ZIGO Friday, Feb 3, 2012 Before: AXL, BEAM, BAH, CLX, UFS, RDY, EL, HNT, HRG, KBALB, MAC, MOD, MGI, OB, PC, SPG, SIRO, SEP, SPB, TSN, WY
During: – After: CBNJ, WGL 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.
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There is a very high degree of risk involved in trading securities. Past results are not indicative of future returns. Prior to the execution of any securities trade, you should always consult with your broker or other financial advisor. The positions given and described by the Bastiat Group, Inc. and its employees and affiliates are for educational purposes only. The Bastiat Group, Inc. and its members, employees, agents, consultants, analysts, representatives, content and/or service providers, affiliates, subsidiaries, successors and assigns (hereinafter collectively, “The Bastiat Indemnities”) assume no responsibility or liability for your trading and investment results. Go to http://www.tonihansen.com/disclaimer.html for a complete disclaimer. (c) 1998-2011 All information presented is property of TradingFromMainStreet.com and Bastiat Group, Inc. PO Box 330 Roland, IA 50236 , USA To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?LEwsrOzMtCxMnBwcTCzstEa0jIwMjAyMzJw=
