Tuesday brought a down day to the market on mixed volume. The NYSE volume was higher and the Nasdaq was slightly lower. The A/D and U/D lines were heavy all day and we saw the Nasdaq and NYSE markets on the same page for the first time in weeks for breadth. The TRIN closed at 1.70 a zone we haven’t traded to since mid December. The VIX traded up to the 10dma and fell off to close at 18.25. Gold closed down 422.00 to $1129.30 an ounce and oil down $1.73 to $80.79 ahead of Wednesdays inventory.
The Nasdaq Composite and Nas 100 fell enough to erase the gains we’ve seen in this crawling up action all of January. The SPX took back the last 4 days of gains and the Dow only took back yesterday’s gains. The initial weakness came from the fall off Alcoa (AA) earnings news in Monday’s after hours, AA is a Dow Component, but the Dow still held up better than any other index on the day. The market needed a pullback and has been rising on anemic volume, Alcoa was just a good excuse. They did miss on EPS, but looked good on the revenue side. The miss is making everyone jittery and was an excuse to see the market pull off and hold near the highs while we wait on a few big hitters like Intel (INTC) and JP Morgan (JPM) later in the week.
Late day the market had a nice reaction bounce to lift the markets off the lows and recoup 38.2% of the losses on the day. Which is a nice late day move against the weight on the day. Wednesday brings us to mid week and there is no economic data until 2:00 which is usually a market mover off the Beige book. That gives the market the opportunity to have a slow opening and look for this bounce to continue. A higher opening is likely to get faded and sit the market in range until the afternoon data is out. Tuesday’s daily candle on the SPX and Dow are possible reversal candles and should be watched for confirmation with a lower close on Wednesday. Monday left reversal candles and confirmed on Tuesday with this drop. The Nasdaq hasn’t closed under the 10dma since December 17th, Tuesday’s close below left the index just over the 20dema. Another down day would likely let the 10dma and 20dema converge and even cross down. Keep an eye on that for a bearish tone to come in there. The SPX and Dow are still over the 10dma, but like the Nasdaq another day of selling would drop it and leave us looking for a heavier picture to form.
The 60 minute charts on futures left a bear flag on the day. Any gap up on Wednesday is likely to fade and trigger that flag formation for another drop. The ES, NQ and TF have all tested the weekly pivot now and did not test the daily on Tuesday. Look for Wednesday to hug the daily pivots and the big support levels are NQ 1849, ES 1124.50 and TF 628.30. Resistance levels 637.10 on the TF, NQ 1867.50 and ES 1135, if we gap over those, look to come back for a retest and then onto Tuesdays close. Tuesday’s drop did leave gaps overhead and that is resistance over the levels above to watch for with any upside move.
Economic data for the week (underlined means more likely to be a mkt mover): Wednesday 10:30 Crude Inventories, 2:00 Beige Book, 2:00 Federal Budget Balance. Thursday 8:30 Core Retail Sales, 8:30 Retail Sales, 8:30 Unemployment Claims, 8:30 Import Prices, 10:00 Business Inventories, 10:30 Natural Gas. Friday 8:30 Core CPI, 8:30 CPI, 8:30 Empire Manufacturing, 9:15 Capacity Utilization Rate, 9:15 Industrial Production, 9:55 Prelim UoM Consumer Sentiment, 9:55 Prelim UoM Inflation Expectations.
Some earnings for the week (keep in mind companies can change last minute: Wednesday pre market NWPX and after the bell OHB, ZZ. Thursday pre market SCHW and after the bell INTC. Friday pre market JPM and nothing after the bell.
ES (S&P 500 e-mini) Wednesday’s pivot 1133.25, weekly pivot 1132.25. Intraday support: 1129, 1126-1124.50, 1120.50, 1117.50, 1113.50 fills gap, 1109.75. Resistance: 1135, 1137.75, 1139.50, 1142.50 fills gap, 1146.75-1147.25, 1153.50, 1157, 1160.50.
