Buyer Beware Indeed! Daily market commentary by Toni Hansen

September 29, 2011

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Daily Commentary

Economic Woes Fail to Abate (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 September 28, 2011 (10:14 pm ET): Closing Prices: DOW 11,010.90 (-179.79, -1.61%),SandP 500 1,151.06 (-24.32, -2.07%), NASDAQ 2,491.58 (-55.25, -2.17%), Nikkei 225 8,531.02 (-84.63, -0.98), DAX 5,578.42 (-50.02, -0.89%), FTSE 5,217.63 (-76.42, -1.44%) OIL 80.58, GOLD 1,607.70, SILVER 30.21 EURO 1.3556, YEN 76.53, BRITISH POUND 1.5582, U.S. DOLLAR INDEX 78.60 Buyer Beware Indeed! Despite strong gains, Tuesday was a difficult day for the bulls. It was the third straight day of upside, but the majority of the gains took place in premarket trade and the pace of the buying was slower than earlier selloffs and even the previous day’s upswings. This allowed the market to rapidly move lower once the uptrend channel gave way, so despite establishing a triple point gain in the Dow Jones Industrial Average and gains over 1% in the major indices, the bull move was only a positive one for bullish daytraders in theory and the strongest action to catch was the afternoon flush to the downside that I had warned about. That warning continued to be in affect heading into Wednesday’s session and with good reason. The 50-day moving averages served as strong resistance for the SandP 500 and Dow Jones Ind. Average on Tuesday.

This was another contributing factor to Tuesday’s late-day reversal, but it was also a warning sign for short-term traders. The market had collapsed in early August and upside on the daily time frame since that point had been limited to moves off the lower end of a gradual uptrend channel on the weekly time frame. THURSDAY’S OUTLOOK Last week was an attempt from the market to break the lower end of that trend channel, but the fall off the upper end of the channel lent support to prior lows and a total breakdown failed. It is more ideal for the market to hug the lower end of the trading channel before breaking down further in order to establish strong continuation patterns for shorts. Alternately, when a low-level base does reverse and break higher, the market will begin to shift its momentum with slower downside within the range and even moves that hug the upper end of that larger channel. Neither of these things has yet to happen, which leaves the market still stuck within that larger daily channel that has been in play since early August and it means ongoing favor for a continuation of the channel on the 60 minute charts as we move into the end of the week. Dow Jones Industrial Average (Figure 1) Commodities Outlook Remains Unchanged The commodities remained at the forefront of market news on Wednesday. Tuesday’s relief rally on light volume gave way to selling once again which wiped out all of the earlier recovery. As I mentioned yesterday, the 200 day moving average in gold will be serving as a magnet and gold is easily at risk of being dragged down into that zone and price support from early summer. We should not experience a repeat of last week’s selloff on any continuation move, however, and greater overlap in price action from one day to the next can be expected. Gold settled at $1,618.10 an ounce in New York on Wednesday with a loss of $34.40. Silver settled lower at $30.134 an ounce. Crude oil settled lower by $3.24 at $81.21 a barrel. SandP 500 (Figure 2) Index Results The Dow Jones Industrial Average ($DJI) ended the day on Wednesday with a loss of 179.79 points, or 1.61%, and closed at 11,010.90. The Dow reversed course and after several days of near total gains, all thirty of the Dow’s index components posted a loss on the day. The weakest performers were Alcoa (AA) (-4.96%), Bank of America (BAC) (-4.94%), 3M (MMM) (-3.51%), and JP Morgan (JPM) (-3.48%). The SandP 500 ($SPX) finished the session with a loss of 24.32 points, or 2.07%, and closed at 1,151.06.

The top percentage gainers in the SandP 500 on Friday were Jabil Circuit (JBL) (+8.40%), Amazon.com (AMZN) (+2.45%), and Paychex Inc. (PAYX) (+0.86%). Only thirteen of the SandP 500 index components posted a gain. The top decliners were Alpha Natural Resources (ANR) (-11.01%), First Solar (FSLR) (-10.41%), JDS Uniphase (JDSU) (-8.49%), and Cliffs Natural Resources (CLF) (-8.41%). The Nasdaq Composite ($COMPX) ended the session lower by 55.25 points, or 2.17%, on Wednesday and it closed at 2,491.58. The strongest performers in the Nasdaq-100 ($NDX) were Amazon.com (AMZN) (+2.45%), Dollar Tree (DLTR) (+1.12%), and Paychex Inc. (PAYX) (+0.86%). Only nine index components posted a gain. The top decliners were First Solar (FSLR) (-10.41%), CTrip.com (CTRP) (-8.83%), and Micron Technology (MU) (-5.41%). Nasdaq Composite (Figure 3) ECONOMIC REPORTS AND EVENTS THIS WEEK U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Sep 27 9:00 AM Case-Shiller 20-city Index Jul Sep 27 10:00 AM Consumer Confidence Sep Sep 28 7:00 AM MBA Mortgage Index 09/24 Sep 28 8:30 AM Durable Orders Aug Sep 28 8:30 AM Durable Ordes ex Transportation Aug Sep 28 10:30 AM Crude Inventories 09/24 Sep 29 8:30 AM Initial Claims 09/24 Sep 29 8:30 AM Continuing Claims 09/17 Sep 29 8:30 AM GDP – Third Estimate Q2 Sep 29 8:30 AM GDP Deflator – Third Estimate Q2 Sep 29 10:00 AM Pending Home Sales Jul Sep 30 8:30 AM Personal Income Aug Sep 30 8:30 AM Personal Spending Aug Sep 30 8:30 AM PCE Prices – Core Aug Sep 30 9:45 AM Chicago PMI Sep Sep 30 9:55 AM Michigan Sentiment – Final Sep International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Sep 27 EUR German Retail Sales (AUG) Sep 27 GBP Nationwide House Prices n.s.a. (SEP) Sep 27 02:00 CHF UBS Consumption Indicator (AUG) Sep 27 05:30 CHF KOF Institute September Economic Forecast Sep 27 06:00 GBP CBI Reported Sales (SEP) Sep 27 10:00 USD Consumer Confidence (SEP)

*** Sep 27 21:00 AUD HIA New Home Sales (AUG) Sep 28 EUR German Import Price Index (AUG)

*** Sep 28 02:00 EUR German GfK Consumer Confidence Survey (OCT) (OCT) Sep 28 08:30 USD Durable Goods Orders (AUG)

*** Sep 28 08:30 USD Durables Ex Transportation (AUG) Sep 28 19:50 JPY Retail Trade (AUG) Sep 28 19:50 JPY Large Retailers’ Sales (AUG) Sep 29 EUR German Consumer Price Index (SEP P)

*** Sep 29 JPY Nomura/JMMA Manufacturing Purchasing Manager Index (SEP) Sep 29 04:30 GBP Net Consumer Credit (AUG) Sep 29 04:30 GBP Net Lending Sec. on Dwellings (AUG) Sep 29 04:30 GBP Mortgage Approvals (AUG) Sep 29 05:00 EUR Euro-Zone Business Climate Indicator (SEP) Sep 29 05:00 EUR Euro-Zone Consumer Confidence (SEP F) Sep 29 05:00 EUR Euro-Zone Economic Confidence (SEP) Sep 29 05:00 EUR Euro-Zone Industrial Confidence (SEP) Sep 29 05:00 EUR Euro-Zone Services Confidence (SEP) Sep 29 08:30 USD Gross Domestic Product (Annualized) (2Q T)

*** Sep 29 08:30 USD Personal Consumption (2Q T)*** Sep 29 08:30 USD Gross Domestic Product Price Index (2Q T)

*** Sep 29 08:30 USD Core Personal Consumption Expenditure (2Q T) Sep 29 10:00 USD Pending Home Sales (AUG) Sep 29 17:45 NZD Building Permits (AUG) Sep 29 19:01 GBP GfK Consumer Confidence Survey (SEP) Sep 29 19:30 JPY Household Spending (AUG) Sep 29 19:30 JPY Jobless Rate (AUG) Sep 29 19:30 JPY National Consumer Price Index (AUG) Sep 29 19:30 JPY National Consumer Price Index Ex-Fresh Food (AUG) Sep 29 19:30 JPY National Consumer Price Index Ex Food, Energy (AUG) Sep 29 19:50 JPY Industrial Production (AUG P) Sep 29 21:00 NZD NBNZ Activity Outlook (SEP) Sep 29 21:00 NZD NBNZ Business Confidence (SEP) Sep 29 21:30 AUD Private Sector Credit (AUG) Sep 30 01:00 JPY Annualized Housing Starts (AUG) Sep 30 01:00 JPY Housing Starts (AUG) Sep 30 05:00 EUR Euro-Zone Consumer Price Index Estimate (SEP) Sep 30 05:00 EUR Euro-Zone Unemployment Rate (AUG) Sep 30 05:30 CHF KOF Swiss Leading Indicator (SEP) Sep 30 08:30 USD Personal Income (AUG) Sep 30 08:30 CAD Gross Domestic Product (JUL) (JUL)

*** Sep 30 08:30 USD Personal Spending (AUG) Sep 30 08:30 CAD Gross Domestic Product (JUL)*** Sep 30 08:30 USD Personal Consumption Expenditure Core (AUG) Sep 30 09:55 USD U. of Michigan Confidence (SEP F)

*** Sep 30 21:00 CNY PMI Manufacturing (SEP)***

*** 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 ANNOUNCMENTS THIS WEEK Monday, Sep 26, 2011 Before: – During: TPI After: – Tuesday, Sep 27, 2011 Before: AM, NEOG, PKE, WAG During: – After: ACN, CMTL, PAYX, PRGS, SABA, SMSC, SNX Wednesday, Sep 28, 2011 Before: ATU, DRI, MKC, NEWL During: – After: MOS, OMN, TXI, WOR Thursday, Sep 29, 2011 Before: – During: – After: CAMP, MU Friday, Sep 30, 2011 Before: – During: – 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.

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