(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.)
FRIDAY’S MARKET WRAP-UP
Market Snapshot for November 13, 2011 (7:22 a.m. ET):
Closing Prices: DOW 12,153.68 (+259.89, +2.19%), S&P 500 1,263.85 (+24.16, +1.95%), NASDAQ 2,678.75 (+53.60, +2.04%), Nikkei 225 8,514.47 (+13.67, +0.16%), DAX 6,057.03 (+189.22, +3.22%), FTSE 5,545.38 (+100.56, +1.85%)
OIL 98.99, GOLD 1,788.10, SILVER 34.682
EURO 1.3746, YEN 77.10, BRITISH POUND 1.6077, U.S. DOLLAR INDEX 77.13
Congestion Continues into Weekend
The market has been dealing with resistance on the daily time frame over the past couple of weeks while earnings season reached its peak and the EU attempted to sort out the most recent developments in Greece and Italy where the prime ministers in both countries have since announced their resignations. A shift in upside momentum mid-week last week held back the bulls that had led the way heading into the month and strong selling hit on Wednesday that took the indices back to the lower end of the 30-minute trading range. A Momentum Reversal buy triggered early Thursday morning in premarket trade as the European markets opened, but the indices struggled to find direction intraday.
Dow Jones Industrial Average (Figure 1)
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The market’s intraday struggles continued on Friday. Congestion in premarket trade created a strong breakout early in the day, but volume was light due to the Veteran’s Day holiday and the momentum slowed by mid-morning. Trade after the 10:45 ET correction period was fairly choppy with a lot of overlap on the five minute time frame as well as the 15 minute one. Technical patterns and support and resistance levels still continued to hold extremely well, but the greater degree of price overlap and tighter range of the congestion limited follow-through and diminished reward potential compared to traditional stop zones.
Consumer Sentiment Improves Unexpectedly
Economic data was on the light side this past week, but the week ended with a welcome upside surprise in the form of an unexpected improvement in consumer sentiment for November. The Reuters/University of Michigan Consumer Sentiment Index climbed from 60.9 in October to 64.2 in its preliminary reading posted on Friday. Economists had been expecting it to inch higher to 61.3.
This will be another relatively light week for data, but keep an eye out for October’s Producer Price Index on Tuesday and the Consumer Price Index on Wednesday. Retail sales for October are also due out on Tuesday morning. A small gain in overall sales is expected.
Even though earnings season starts to wind down this week, some name to watch for are the retailers. JC Penny (JCP) and Urban Outfitters (URBN) report on Monday, while Saks (SKS) reported on Tuesday. Abercrombie *& Fitch (ANF) reports Wednesday and Gap (GPS) reports Thursday. Ann (Taylor) (ANN) reports on Friday. Home improvement giants Home Depot (HD) (Tuesday) and Lowe’s (LOW) (Monday) also report this week. So far this season about 70% of earnings reported in the S&P 500 have topped expectations. Less than 10% are left to report.
S&P 500 (Figure 2)
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Index Wrap-up
The Dow Jones Industrial Average ($DJI) ended the day on Friday with a gain of 258.89 points, or 2.19%, and closed at 12,153.68. All of the Dow’s index’s thirty components posted a gain. The top performers were Disney (DIS) (+5.95%), Caterpillar (CAT) (+4.26%), Alcoa(AA) (+3.41%), and Intel (INTC) (+3.8%). The weakest were the telecoms: Verizon (VZ) (+0.51%) and AT&T (T) (+0.89%). The Dow ended the week higher by 1.42%. It is currently up 4.98% year-to-date.
The S&P 500 ($SPX) finished the session with a gain of 24.16 points, or 1.95%, and closed at 1,263.85. The strongest individual percentage performers in the index were Staples (SPLS) (+6.12%), Genworth Finl. (GNW) (+6.11%), Disney (DIS) (+5.95%), and Ryder Sys. (R) (+5.86%). Only thirteen of the index’s components posted a loss. The weakest were E Trade Financial Corp. (ETFC) (-4.11%) and Valero Energy Corp. (VLO) (-3.28%).
The Nasdaq Composite ($COMPX) ended the session higher by 53.60 points, or 2.04%, on Friday and it closed at 2,678.75. The top index components in the Nasdaq-100 ($NDX) were Green Mountain Coffee (GMCR) (+6.90%), Staples (SPLS) (+6.12%), Lam Research (LRCX) (+6.02%), and Research In Motion (RIMM) (+5.18%). Only six posted a loss. The weakest were Activision Blizzard (ATVI) (-2.08%) and Vertex Pharmaceuticals (VRTX) (-1.84%).
Nasdaq Composite (Figure 3)
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OUTLOOK
Getting Technical
The index futures have risen once again on Sunday evening, breaking out of Friday’s afternoon congestion. The strong pace of Friday morning’s rally, however, leaves the trend facing exhaustion on the 15 minute time frame and last month’s highs remain a substantial hurdle. There is room for slightly higher highs again as we roll over into Monday, but sustaining that buying will be difficult without a longer period of correction than seen within this current upswing over the past couple of days.
