October 18, 2011
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DAILY COMMENTARY
Weekly Resistance Zone Hits
(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.) MONDAY’S MARKET WRAP-UP Market Snapshot for October 17, 2011 (8:45 p.m. ET): Closing Prices: DOW 11,397.00 (-247.49, -2.13%), SandP 500 1,200.86 (-23.73, -1.94%), NASDAQ 2,614.92 (-52.93, -1.98%), Nikkei 225 8,752.86 (-126.74, -1,43), DAX 5,859.43 (-107.77, -1.81%), FTSE 5,436.70 (-29.66, -0.54%) OIL 86.33, GOLD 1,674.30, SILVER 31.86 EURO 1.3769, YEN 76.80, BRITISH POUND 1.5777, U.S. DOLLAR INDEX 77.345 Daily and Monthly Resistance Levels Put a Stop to Recovery Efforts The market experienced its strongest day of selling on Monday since hitting new yearly lows on October 4th. The session was ripe for profit-taking with the market up 6% in the last week alone and both the SandP 500 ($SPX) and Dow Jones Ind. Average ($DJI) striking 100 day and 20 week moving average resistance levels. The stronger Nasdaq has also been flirting with larger-scale resistance at the year’s highs. The reversal we were looking for off this resistance level heading into early Monday morning finally kicked off shortly after 5:00 a.m. ET after the pace of the buying in the index futures slowed to form a 5 minute Momentum Reversal between 2:30 and 5:15 a.m. ET. The premarket selling gained strength immediately out of the Momentum Reversal pattern and the futures only paused briefly around 6:00 a.m. ET at earlier premarket lows before continuing to sell off sharply ahead of the opening bell. The move rapidly eroded Sunday evening’s gains, as well as those from Friday after the 16:00 ET closing bell, and left the market in negative territory before Monday morning’s opening bell even rang. Although somewhat more erratic, the premarket downtrend continued throughout Monday’s session and past the closing bell. It was the most decisive downtrend day we’ve seen since September 30th with momentum that even outpaced that day’s trend move.
Average New York Manufacturers See Grim Future Monday’s economic data did little to improve the mood. The Empire State (New York) manufacturing index indicated further contraction in the state for the fifth straight month in October. The reading on new orders, however, was up slightly to 0.16 from -8.0 last month. This is the highest level new orders have been at since spring, but the state’s manufacturing plants indicated a worsening outlook in business conditions over the next six months to a level not seen since early 2009. SandP 500 (Figure 2) INDEX WRAPUP The Dow Jones Industrial Average ($DJI) ended the day on Monday with a loss of 247.49 points, or 2.13%, and closed at 11,397.00. All thirty of the Dow’s index components posted a loss. The top performers were ATandT (T) (-0.51%), Exxon Mobil (XOM) (-0.82%), and Intel (INTC) (-0.94%). The weakest were Alcoa (AA) (-6.63%), Hewlett Packard (HPQ) (-4.79%), 3M (MMM) (-3.82%). The SandP 500 ($SPX) finished the session with a loss of 23.72 points, or 1.94%, and closed at 1,200.86. Only thirty-four issues ended the session in the black. The top individual percentage performer in the index was El Paso Corp. (EP) (+24.81%) on news that Kinder Morgan intends to purchase the company for $20.7 billion. It’s gains were followed by Anadarko Pete. Corp. (APC) (+5.48%), and Walgreen (WAG) (+2.70%). The weakest were Pulte Group (PHM) (-9.48%), Gannett Inc. (GCI) (-8.68%), Wells Fargo (WFC) (-8.44%), and Halliburton (HAL) (-7.88%). Wells Fargo (WFC), the fourth-largest U.S. bank, surprised investors by missing earnings estimates by a penny a share. Halliburton’s (HAL) losses came even after the company posted better-than-expected earnings. In recent years the company has seen tremendous growth in demand for natural gas from U.S. shale rock, which has also been surrounded by a great deal of controversy due to the levels of methane emitted by the gas, as well as the chemicals used in the fracturing process to release the gas. The Nasdaq Composite ($COMPX) ended the session lower by 52.93 points, or 1.98%, on Monday and it closed at 2,614.92. The strongest performers in the Nasdaq-100 ($NDX) were Sears Holdings (SHLD) (+1.41%), Netflix (NFLX) (+1.11%), and Costco (COST) (+0.72%). The weakest performer was Green Mountain Coffee (GMCR) (-10.41%) after fund manager David Einhorn expressed a negative bias for the stock, which had more than tripled this year by the time it hit last month’s highs. Other top decliners included Vertex Pharmaceuticals (VRTX) (-7.37%), Research In Motion (RIMM) (-6.55%), and Cerner Corp. (CERN) (-5.92%).
OUTLOOK
European Debt Crisis and Quarterly Earnings Vie for Influence Although the jobs situation at home has been a focus in recent weeks with eyes on Obama’s jobs plan, eyes have returned to the European debt crisis and towards third quarter earnings after Obama’s bill hit a major roadblock in the Senate early last week. European leaders are struggling to reach an agreement of their own on how to handle their own economic turmoil and headlines have wavered from positive to negative on nearly a daily basis. While the market struggles with major resistance on daily and weekly time frames, earnings have now also entered the mix. Nearly half of the Dow’s thirty index components report this week, including Intel (INTC), McDonalds (MCD), and General Electric. Among SandP 500 companies (96 of whom report this week), earnings are expected to have risen 23% in Q3 (according to Thomson Reuters). Meanwhile, revenues are expected to have increased 10%. All of these variables mixed together with the resistance on the heels of two weeks of strong upside are a recipe for a choppy market as the indices sway from one day to the next based upon the latest news to hit the wires. A wider momentum shift with the indices creeping higher over the next week or two remains quite possible, but resistance levels and a larger shift in the upside momentum on the 60 minute charts is beginning to favor the bears in many individual securities. Potential magnets to pull the market higher are the 200 day moving averages which loom just overhead in the SandP 500 and Dow, while prior highs are near at hand in the Nasdaq. The pace of Monday’s selloff, however, leaves this possibility up in the air. In order for more buying to materialize to pull the market into these next levels of resistance, the indices need a rather strong reaction off the price support zone that is hitting on the intraday time frames in the index futures heading into midnight. This support includes prior lows and 10 day moving averages.
ECONOMIC REPORTS AND EVENTS THIS WEEK
U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Oct 17 8:30 AM Empire Manufacturing Oct Oct 17 9:15 AM Industrial Production Sep Oct 17 9:15 AM Capacity Utilization Sep Oct 18 8:30 AM PPI Sep Oct 18 8:30 AM Core PPI Sep Oct 18 9:00 AM Net Long-Term TIC Flows Aug Oct 18 10:00 AM NAHB Housing Market Index Oct Oct 19 7:00 AM MBA Mortgage Index 10/15 Oct 19 8:30 AM CPI Sep Oct 19 8:30 AM Core CPI Sep Oct 19 8:30 AM Housing Starts Sep Oct 19 8:30 AM Building Permits Sep Oct 19 10:30 AM Crude Inventories 10/15 Oct 19 2:00 PM Fed’s Beige Book Oct Oct 20 8:30 AM Initial Claims 10/15 Oct 20 8:30 AM Continuing Claims 10/08 Oct 20 10:00 AM Existing Home Sales Sep Oct 20 10:00 AM Philadelphia Fed Oct Oct 20 10:00 AM Leading Indicators Sep International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Oct 16 19:01 GBP Rightmove House Prices (OCT) Oct 17 JPY Machine Tool Orders (SEP F) (SEP F) Oct 17 00:30 JPY Industrial Production (AUG F) Oct 17 09:15 USD Industrial Production (SEP) Oct 17 10:30 CAD Business Outlook Future Sales (3Q) Oct 17 10:30 CAD Band of Canada Senior Loan Officer Survey (3Q) Oct 17 20:30 AUD Reserve Bank’s Board October Minutes*** Oct 17 22:00 CNY Real GDP YTD (3Q)*** Oct 17 22:00 CNY Real GDP (3Q)*** Oct 17 22:00 CNY Industrial Production YTD (SEP) Oct 17 22:00 CNY Industrial Production (SEP) Oct 17 22:00 CNY Fixed Assets Inv Excl. Rural YTD (SEP) Oct 17 22:00 CNY Retail Sales YTD (SEP) Oct 17 22:00 CNY Retail Sales (SEP) Oct 18 GBP Nationwide Consumer Confidence (SEP) Oct 18 04:30 GBP Consumer Price Index (SEP)*** Oct 18 04:30 GBP Core Consumer Price Index (SEP) Oct 18 05:00 EUR German ZEW Survey (Current Situation) (OCT) Oct 18 05:00 EUR Euro-Zone ZEW Survey (Economic Sentiment) (OCT)*** Oct 18 08:30 USD Producer Price Index (SEP)*** Oct 18 08:30 USD Producer Price Index Ex Food and Energy (SEP)*** Oct 18 09:00 USD Net Long-term TIC Flows (AUG) Oct 18 12:30 USD Fed’s Bernanke Speaks in Boston *** Oct 19 00:30 JPY All Industry Activity Index (AUG) Oct 19 04:30 GBP Bank of England Minutes*** Oct 19 08:30 CAD Leading Indicators (SEP) Oct 19 08:30 USD Consumer Price Index (SEP)*** Oct 19 08:30 USD Consumer Price Index Ex Food and Energy (SEP)*** Oct 19 08:30 USD Housing Starts (SEP) Oct 19 08:30 USD Consumer Price Index Core Index s.a. (SEP) Oct 19 08:30 USD Building Permits (SEP) Oct 19 14:00 USD Fed Releases Beige Book Economic Survey Oct 20 01:00 JPY Leading Index (AUG F) Oct 20 02:00 EUR German Producer Prices (SEP)*** Oct 20 02:00 CHF Trade Balance (SEP) Oct 20 04:30 GBP Retail Sales (SEP) Oct 20 04:30 GBP Retail Sales w/Auto Fuel (SEP) Oct 20 05:00 CHF ZEW Survey (Expectations) (OCT) Oct 20 10:00 EUR Euro-Zone Consumer Confidence (OCT A) Oct 20 10:00 USD Leading Indicators (SEP) Oct 20 10:00 USD Philadelphia Fed. (OCT) Oct 20 10:00 USD Existing Home Sales (SEP) Oct 20 22:00 NZD Credit Card Spending s.a. (SEP) Oct 21 03:00 CHF Real Estate Index Family Homes (3Q) Oct 21 04:00 EUR German IFO – Business Climate (OCT) Oct 21 04:00 EUR German IFO – Current Assessment (OCT) Oct 21 04:00 EUR German IFO – Expectations (OCT) Oct 21 04:30 GBP Public Finances (PSNCR) (SEP) Oct 21 04:30 GBP PSNB ex Interventions (SEP) Oct 21 04:30 GBP Public Sector Net Borrowing (SEP) Oct 21 05:00 EUR Euro-Zone Government Debt-GDP Ratio (2010)*** Oct 21 07:00 CAD Consumer Price Index (SEP)*** Oct 21 07:00 CAD Bank Canada Consumer Price Index Core (SEP)*** Oct 21 07:00 CAD Consumer Price Index (SEP) *** 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, Oct 17, 2011 Before: SCHW, C, FHN, GCI, HAL, HAS, WFC During: PHG After: BMI, ELS, ICUI, IBM, LNCR, MFI, PCBK, PKG, PRK, SWK, STLD, TESS, VMW, WDFC, WAL Tuesday, Oct 18, 2011 Before: ASRV, BAC, CHKP, KO, DPZ, EMC, FRX, GPC, GS, HOG, JAKK, JNJ, LBAI, MBWM, EDU, PH, PTI, PII, STT, UNF, UNH, GWW During: – After: AAPL, CREE, CCK, CSX, FLXS, FSII, FULT, HA, INFN, INTC, ISRG, JNPR, KED, LLTC, MANH, MRTN, PNFP, PTP, RNST, RLI, SONC, URI, WCN, WERN, YHOO Wednesday, Oct 19, 2011 Before: ABT, MO, APH, AMR, ATMI, BK, BLK, CMA, CTBI, DRH, FCFS, IPT, KCG, KNL, LUFK, MHH, MEG, MS, NGNM, NYB, NTRS, PJC, PNC, BPOP, ROC, SYBT, STJ, SCL, SVU, TXT, TRV, USB, UTX, VCBI, WNS During: ANCX, WABC After: EGHT, AXP, AMLN, AF, BANR, BWLD, CATY, CVCY, CAKE, CRUS, COHU, CLB, CVA, CBST, CVBF, DTLK, ETFC, EWBC, EBAY, EW, EXPO, FNB, FNF, FWRD, FSL, GLF, HNI, KMP, KMR, LRCX, LHO, MKSI, MCRI, NFX, NE, PLCM, RJF, RVBD, SLM, SCSS, SPTN, SYK, SWFT, TCBI, TSCO, WSTL, WDC, WHG, XLNX, ZHNE Thursday, Oct 20, 2011 Before: ALK, ALXN, ADS, ACO, T, AN, BLX, BAX, BBT, BX, BSX, BGG, CSH, CBE, CY, CYS, DHR, DO, LLY, ECA, FITB, FNFG, FRC, FLIR, GMT, GNTX, HAFC, HOMB, HBAN, IEX, IR, IIIN, ESI, JNS, KNSY, KEY, LH, LSTR, LTM, MNRO, MYE, NYT, NBL, NOK, NUE, PENN, PM, POOL, PPG, SASR, SJR, SFNC, SNA, SON, LUV, TCB, ERIC, TNB, UTEK, UMPQ, UNP, USAK, USG, UTMD, WFSL, WSO, WCC During: ALNC, FMFC After: SRCE, ACTG, APKT, ALTR, APOL, ASBC, ATHN, TBBK, BAS, BJRI, BLDR, CALX, COF, CPHD, CMG, CB, CYN, CPWR, CYMI, CYT, EGP, EFII, FFIN, FLEX, GDI, HITT, INDB, INFA, IBKR, LSCC, MXIM, MBFI, MSFT, NTCT, OCFC, PBCT, PXLW, PFBC, PGI, RMTR, RRR, SNDK, SCHN, SBCF, STX, STLY, SYNA, TCO, TPX, WSCI Friday, Oct 21, 2011 Before: AOS, APD, GE, HAR, HON, IDXX, KSU, KCI, MAN, MNI, MUSA, PDS, PRSP, SLB, SXT, STI, UBNK, VZ During: – After: MCBI Note: Alleconomic 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
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=
