October 14, 2011

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DAILY COMMENTARY

Market Pace Shifts (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 October 13, 2011 (7:50 a.m. ET): Closing Prices: DOW 11,478.13 (-40.72, -0.35%), SandP 500 1,203.66 (-3.59, -0.3%), NASDAQ 2,620.24 (+15.51, +0.6%), Nikkei 225 8,823.25 (-, -), DAX 5,914.84 (-79.63, -1.33%), FTSE 5,403.38 (-38.42, -0.71%) OIL 84.13, GOLD 1,668.00, SILVER 31.795 EURO 1.3764, YEN 76.88, BRITISH POUND 1.5754, U.S. DOLLAR INDEX 77.285 Tech Shares Lead While Financials Struggle Thursday’s trade was mixed as earnings season started to heat up. The market has been on a roar for a week and a half and has been pushing hard to hit the next daily resistance in the SandP 500 ($SPX) and Dow Jones Ind. Average ($DJI) at 100-day moving averages, but the slowdown we were looking for emerged on Thursday thanks to a larger price correction off Wednesday’s highs compared to other corrections within this daily recovery. As with many pullbacks, the correction was two-fold. It began with a sharp decline into the close on Wednesday, but after consolidating afterhours the secondary pullback was much more gradual into early morning trade on Thursday. In index futures slid down 15 minute 20 period moving average resistance, keeping things alive for the bulls heading into Thursday’s opening bell. Dow Jones Industrial Average (Figure 1) The slower pace of the secondary wave of selling on the all-sessions time frame in the index futures continued into Thursday morning. Weakness was most pronounced in the financials (-2.4% in the SandP 500 industry group) despite an upside earnings surprise from JP Morgan (JPM). Tech shares, on the other hand, held up extremely well against early market selling ahead of Google’s earnings and the SandP 500 techs posted a gain of 1%. Google (GOOG) provided a pleasant boost even further afterhours on strong quarterly results. Intraday the market rounded off at lows on the 5 minute time frame. Both the SandP 500 and Dow Jones Ind. Averages created solid reverse head and shoulders patterns off lows that was followed by strength throughout the afternoon. This reversal recovered a large portion of the premarket losses even though the indices still posted a loss for the session. The stronger Nasdaq, however, began its recovery from the prior afternoon’s deterioration almost immediately and ended the session with its seventh gain in the past eight sessions. SandP 500 (Figure 2) INDEX WRAPUP The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a loss of 40.72 points, or 0.35%, and closed at 11,478.13. Eleven of the Dow’s thirty index components posted a gain. The top performers were Intel (INTC) (+1.17%), McDonalds (MCD) (+ 1.08%), and Cisco Systems (CSCO) (+0.99%). The weakest were the financials: Bank of America (BAC) (-5.47%), JP Morgan (JPM) (-4.82%), and American Express (AXP) (-1.49%). Travelers (TRV) fell 1.92%. The SandP 500 ($SPX) finished the session with a loss of 3.59 points, or 0.3%, and closed at 1,203.66. The top percentage performers in the index were Range Res. Corp. (RRC) (+8.77%), Owens Ill. Inc. (OI) (+8.47%), Sprint Nextel (S) (+8.17%), and Micron Tech. (MU) (+6.15%). The weakest percentage performers were Genworth Financial Inc. (GNW) (-5.60%), Bank of America (BAC) (-5.47%), Citigroup (C) (-5.34%), JP Morgan (JPM) (-4.82%), and Legg Mason (LG) (-4.69%). The Nasdaq Composite ($COMPX) ended the session higher by 15.51 points, or 0.6%, on Thursday and it closed at 2,620.24. The strongest performers in the Nasdaq-100 ($NDX) were Vertex Pharmaceuticals (VRTX) (+9.05%), Micron Tech. (MU) (+6.15%), NVIDIA Corp. (NVDA) (+5.82%), and Seagate Tech. (STX) (+5.72%). The weakest were Wynn Resorts (WYNN) (-4.67%), Fastenal Co. (FAST) (-2.66%), Apollo Group (APOL) (-2.31%), and Dentsply Intl. Inc. (XRAY) (-1.68%). Google (GOOG) shares surged more than 5% afterhours by beating earnings expectations. Nasdaq Composite (Figure 3)

OUTLOOK

Although the pace of the buying in the indices has shifted as the weekend approaches, the market is still looking to push into 100 day moving average resistance levels. Gradual price correction afterhours created a strong upside continuation pattern heading into midnight on Thursday. This picked up steam throughout premarket trade. By 6:00 a.m. ET, however, 15 minute equal move levels had already hit. This is a strong price resistance level and created a pullback into 8:00 a.m. ET. September’s retail sales provided an extension of the early gains thanks to a 1.1% jump that topped expectations, but this now leaves the market overly extended ahead of Friday’s open. There’s a strong likelihood that we will see the session’s highs hit this morning with profit-taking ahead of the closing bell as the week winds down. I’ll be looking for more of a range bound or narrower intraday trade with the best follow through for reward to risk ratios on 2-5 minute setups versus 15 minute ones.

ECONOMIC REPORTS AND EVENTS THIS WEEK

U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Oct 12 7:00 AM MBA Mortgage Index 10/08 Oct 12 2:00 PM FOMC Minutes Sep. 21 Oct 13 8:30 AM Initial Claims 10/08 Oct 13 8:30 AM Continuing Claims 10/01 Oct 13 8:30 AM Trade Balance Aug Oct 13 11:00 AM Crude Inventories 10/08 Oct 13 2:00 PM Treasury Budget Sep Oct 14 8:30 AM Retail Sales Sep Oct 14 8:30 AM Retail Sales ex-auto Sep Oct 14 8:30 AM Export Prices ex-ag. Sep Oct 14 8:30 AM Import Prices ex-oil Sep Oct 14 9:55 AM Mich Sentiment Oct Oct 14 10:00 AM Business Inventories Aug International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Oct 10 CNY Actual FDI (SEP) Oct 10 NZD REINZ House Sales (SEP) Oct 10 02:00 EUR German Trade Balance (AUG) Oct 10 04:30 EUR Euro-Zone Sentix Investor Confidence (OCT) Oct 10 17:45 NZD NZ Card Spending – Retail (SEP) Oct 10 17:45 NZD NZ Card Spending (SEP) Oct 10 19:01 GBP RICS House Price Balance (SEP) Oct 10 19:50 JPY Trade Balance – BOP Basis (AUG) Oct 10 20:30 AUD NAB Business Confidence (SEP) Oct 11 CNY Foreign Exchange Reserves (SEP) Oct 11 CNY New Yuan Loans (SEP)*** Oct 11 JPY Machine Tool Orders (SEP P) Oct 11 00:30 JPY Bankruptcies (SEP) Oct 11 01:00 JPY Bank of Japan Monthly Economic Report *** Oct 11 01:00 JPY Consumer Confidence (SEP) Oct 11 02:00 JPY Eco Watchers Survey: Current (SEP) Oct 11 02:00 JPY Eco Watchers Survey: Outlook (SEP) Oct 11 04:30 GBP Industrial Production (AUG) Oct 11 04:30 GBP Manufacturing Production (AUG) Oct 11 08:15 CAD Housing Starts (SEP) Oct 11 10:00 GBP NIESR Gross Domestic Product Estimate (SEP) Oct 11 14:00 USD Fed Releases Minutes of Sep. 20 FOMC Meeting *** Oct 11 19:30 AUD Westpac Consumer Confidence (OCT) Oct 11 19:50 JPY Machine Orders (AUG) Oct 11 20:30 AUD Home Loans (AUG) Oct 12 USD Monthly Budget Statement (SEP) Oct 12 04:30 GBP Claimant Count Rate (SEP) Oct 12 04:30 GBP Jobless Claims Change (SEP)*** Oct 12 04:30 GBP Average Weekly Earnings (AUG) Oct 12 04:30 GBP ILO Unemployment Rate (3M) (AUG) Oct 12 05:00 EUR Euro-Zone Industrial Production w.d.a. (AUG) Oct 12 17:30 NZD Business NZ Performance of Manufacturing Index (SEP) Oct 12 19:50 JPY BOJ to Publish Minutes of Sept. 6-7 Board Meeting *** Oct 12 19:50 JPY Tertiary Industry Index (AUG) Oct 12 20:30 AUD Employment Change (SEP)*** Oct 12 20:30 AUD Unemployment Rate (SEP)*** Oct 12 20:30 AUD Full Time Employment Change (SEP) Oct 12 20:30 AUD Part Time Employment Change (SEP) Oct 12 22:00 CNY Business Climate Index (3Q) Oct 12 22:00 CNY Trade Balance (SEP) Oct 13 02:00 EUR German Consumer Price Index (SEP F)*** Oct 13 02:00 EUR German Consumer Price Index – EU Harmonised (SEP F)*** Oct 13 04:00 EUR ECB Publishes Oct. Monthly Report *** Oct 13 04:30 GBP Visible Trade Balance (AUG) Oct 13 08:30 USD Trade Balance (AUG) Oct 13 22:00 CNY Consumer Price Index (SEP)*** Oct 13 22:00 CNY Producer Price Index (SEP) Oct 14 05:00 EUR Euro-Zone Consumer Price Index – Core (SEP) Oct 14 05:00 EUR Euro-Zone Consumer Price Index (SEP)*** Oct 14 08:30 USD Advance Retail Sales (SEP)*** Oct 14 08:30 USD Retail Sales Less Autos (SEP) Oct 14 08:30 USD Retail Sales Ex Auto and Gas (SEP) Oct 14 09:55 USD U. of Michigan Confidence (OCT P)*** Oct 14 10:00 USD Business Inventories (AUG) *** 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, Oct 10, 2011 Before: – During: – After: AUGT Tuesday, Oct 11, 2011 Before: ADTN During: RMCF After: AA, VOXX, EXFO, JOEZ, SURG Wednesday, Oct 12, 2011 Before: ASML, HST, INFY, PEP During: BKSC After: OZRK, ODC, UFPI Thursday, Oct 13, 2011 Before: CBSH, EMMS, FCS, FAST, JPM, LNN, MTOX, SWY, WGO, ZEP During: – After: GOOG, JBHT, NKSH, VMI Friday, Oct 14, 2011 Before: MAT, WBS During: ATLO After: – 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=