October 13, 2011
An online version of this newsletter is available at http://www.tonihansen.com/Newsletters/current.html.
DAILY COMMENTARY
Market Pace Expected to Shift (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.) WEDNESDAY’S MARKET WRAP-UP Market Snapshot for October 13, 2011 (1:40 a.m. ET): Closing Prices: DOW 11,518.85 (+102.55, +0.9%), SandP 500 1,207.25 (+11;71, +0.98%), NASDAQ 2,604.73 (+21.70, +0.84%), Nikkei 225 8,819.92 (+81.02, +0.93), DAX 5,994.47 (+129.47, +2.21%), FTSE 5,441.80 (+46.10, +0.85%) OIL 85.88, GOLD 1,678.60, SILVER 32.2415 EURO 1.3784, YEN 77.08, BRITISH POUND 1.5733, U.S. DOLLAR INDEX 77.215
Gains Erode Following Fed Minutes As Tuesday’s session wound to a close the market was favoring short-term weakness, which played out afterhours, but my expectations heading into Wednesday were that we could easily see the market shift directions once again. Talk of further bailout plans in Europe, namely Slovakia and Greece, and EU plans aimed at further strengthening banks helped trigger an early-morning rally in the index futures that kicked off around 4:00 a.m. ET. Although the momentum slowed on a continuation move intraday, the rally continued throughout most of Wednesday’s session. Wednesday was a decent day for daytraders. Early congestion on the five minute time frame broke sharply higher out of 10:00 a.m. ET and the rally continued mid-day before the indices struck price resistance at prior daily highs at approximately the same time as the 13:00 ET correction period hit. This early afternoon continuation, however, was weaker than earlier price action, casting doubts upon the market’s ability to hold onto the day’s gains in late afternoon trade. The Nasdaq, which had weakened considerably in momentum compared to its premarket rally, was particularly vulnerable.
At 14:00 ET the minutes from September’s Federal Open Market Committee’s meeting were released. At that time, the Fed had stated that it saw considerable uncertainty for a pickup in economic growth. The market had not taken the news well and had sold off sharply at the time. The debate on how the Fed can help support further economic recovery efforts has been an ongoing one dating back nearly to when Bernanke took over the reins of Fed Chairman from Greenspan. There was not an immediately strong price reaction following the release, but the Dow Jones Ind. Average ($DJI) and SandP 500 ($SPX) both pushed to slightly higher highs on the day. This two-wave move from 14:00 to 14:45 ET created a bull trap. Meanwhile, the Nasdaq hugged its 5 minute 20 sma for a two-wave Avalanche short setup. This bearish strategy triggered around 14:45 ET and was followed by another two-wave move in the form of a bear flag off the 5 minute 20 sma resistance that took the market lower once again into the close and afterhours trade. Volume had dropped off mid-day on Wednesday ahead of the minutes, but picked up in the final two hours of trade and particularly as the closing bell approached.
INDEX WRAPUP
The Dow Jones Industrial Average ($DJI) ended the day on Wednesday with a gain of 102.55 points, or 0.9%, and closed at 11,518.85. Twenty-five of the Dow’s thirty index components posted a gain. The top performers were Disney (DIS) (+3.53%), Bank of America (BAC) (+3.30%), JP Morgan (JPM) (+2.79%), and American Express (AXP) (+2.78%). The worst performers were Alcoa (AA) (-2.43%) and McDonalds (MCD) (-1.10%). Alcoa underperformed after posting lower-than-anticipated quarterly earnings. The SandP 500 ($SPX) finished the session with a gain of 11.71 points, or 0.98%, and closed at 1,207.25. The top percentage performers in the index were CBRE Group (CBG) (+8.75%), Sprint Nextel Corp. (S) (+7.98%), MEMC Electr. Materials (WFR) (+6.41%), and Lincoln Natl. Corp. (LNC) (+6.24%). The weakest were Tellabs (TLAB) (-5.32%), Western Digital (WDC) (-4.61%), and Baxter Intl. (BAX) (-3.05%). The Nasdaq Composite ($COMPX) ended the session higher by 21.70 points, or 0.84%, on Wednesday and it closed at 2,604.73. The strongest performers in the Nasdaq-100 ($NDX) were Infosys Ltd. (INFY) (+6.99%), Cognizant Tech. Solutions (CTSH) (+5.60%), and NII Holdings (NIHD) (+5.00%). The weakest were Alexion Pharmaceuticals (ALXN) (-4.16%), Green Mountain Coffee (GMCR) (-3.97%), and Research In Motion (RIMM) (-2.17%). Nasdaq Composite (Figure 3) Earnings Season Kicks Off Alcoa’s earnings marked the unofficial start of third quarter earnings season. JP Morgan (JPM) will be one to watch on Thursday morning, while Google (GOOG) reports after the close on Thursday afternoon. Over the course of this earnings season, companies in the SandP 500 are expected to have risen between 12-13% for Q3 2011 with revenue up 10% (according to Thomson Reuters).
OUTLOOK
Heading into Thursday, the market has continued to hold the 60-minute 20 sma support we were looking at yesterday and has offered a third wave of buying in the SandP 500 and Dow since hitting lows on the 4th. There is still room to move before striking the 100-day moving average resistance, but the market is due for a correction. The market can correct in several ways: It can slow the pace of a trend move, essentially creating a rounded high; it can reverse, which will tend to look like an inverted V; or, it can fall into a trading range and correct through time. In the first option, we would expect to see the pace of the buying slow into the weekend. This would draw the market to that 100-day moving average resistance level and can yield a more rapid initial reaction to that resistance zone. In the second scenario we would not see as much of a shift in momentum and an Avalanche on the 60-minute time frame would be likely. In the third scenario, we would also not see much of a momentum shift in the upside rally before a trading range began. Currently, the first scenario looks most promising, but in any case there is a higher degree of risk for any new swingtrades as long positions at this time.
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. © 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=
