October 19, 2011
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DAILY COMMENTARY
Market Struggles at Major Resistance (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.) TUESDAY’S MARKET WRAP-UP Market Snapshot for October 18, 2011 (8:45 p.m. ET): Closing Prices: DOW 11,577.05 (+180.05, +1.58%), SandP 500 1,225.38 (+24.52, +2.04%), NASDAQ 2,657.43 (+42.51, +1.63%), Nikkei 225 8,741.91 (-, -), DAX 5,877.41 (+17.98, +0.31%), FTSE 5,410.35 (-26.35, -0.48%) OIL 88.28, GOLD 1,655.80, SILVER 32.005 EURO 1.3733, YEN 76.78, BRITISH POUND 1.5707, U.S. DOLLAR INDEX 77.41
Tug-of-War Continues Although the market swung widely off Monday’s lows, not a lot has changed in terms of my expectations. The Dow Jones Ind. Average ($DJI) and SandP 500 ($SPX) are both dealing with resistance levels at 100 day moving averages and 20 week moving averages. These levels put the brakes on a two-week rally and shifted the larger momentum of the rally on the 60 minute time frame. Even though the market has experienced bouts of selling, such as on Monday, this is merely within the context of the shifting momentum of the larger uptrend and has yet to signify any larger price reversal. In fact, the 200 day moving averages in these two major indices still remains a potential magnet for the bulls. As I discussed in yesterday’s column, right now the price action in the market is highly news-driven and wavers strongly from one day to the next, depending on the most recent headlines. In Tuesday’s session this meant a strong reversal from Monday’s bearish bias. The headlines that kicked off the week were mired in skepticism over the euro-zone’s ability to pull itself out of its own economic crisis, but sentiment swung strongly on Tuesday following a report by The Guardian that suggested a solution that would boost the zone’s bailout fund. The news led investors to overlook a possible downgrade of France’s AAA rating by Moody’s and a slowdown in China’s growth in the third quarter.
EARNINGS SPOTLIGHT
Earnings season is also now in full swing and carrying its own weight on day-to-day market action. Nearly half of the Dow’s thirty index components report this week, including American Express (AXP), eBay (EBAY), and General Electric (GE). Among SandP 500 companies (96 of whom report this week), earnings are expected to have risen 23% in Q3 (according to Thomson Reuters). Meanwhile, revenues are expected to have increased 10%. Shares of Apple (AAPL) were down more then 7% afterhours on Tuesday following its fiscal fourth-quarter earnings. The company surprised the market by missing expectations even though the iPhone and iPad maker’s earnings and revenue were up strongly from last year. Despite the disappointment, it offered a better-than-expected outlook for this quarter. Earnings excluding items rose to $7.05 a share, while revenue increased 39% to $28.3 billion. Yahoo (YHOO) also posted earnings following Tuesday’s close. Unlike Apple, its earnings fell this past quarter, but it still beat expectations. This sent shares higher afterhours. Earnings excluding items fell 21 cents a share while net revenue fell to $1.072 billion. Intel (INTC) shares were also on the rise following its earnings. The company beat expectations for this past quarter and posted a strong forecast for the current quarter. Earnings per share excluding items was 69 cents, while revenue rose 29%.
INDEX WRAP-UP
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a gain of 180.05 points, or 1.58%, and closed at 11,577.05. The banks led the Dow to the upside. The top performers were Bank of America (BAC) (+10.12%), JP Morgan (JPM) (+5.90%), Alcoa (AA) (+5.85%), and Chevron Corp. (CVX) (+4.40%). Only IBM (IBM) (-4.12%) and Coca-Cola (KO) (-0.39%) posted losses. IBM was lower after its earnings fell short of expectations. The SandP 500 ($SPX) finished the session with a gain of 24.52 points, or 2.04%, and closed at 1,225.38. The top percentage performers in the index were AK Steel Holding Corp. (AKS) (+12.73%), Pulte Group (PHM) (+11.22%), DR Horton Inc. (DHI) (+11.01%), and Regions Financial Corp. (RF) (+10.69%). Shares in home builders rose following the National Association of Home Builders report that its index for builder sentiment rose from 14 to 18 in October. Thirty-two of the SandP 500’s index components posted a loss on Tuesday. The weakest was Hospira Inc. (HSP) (-21.01%). It was followed by losses in Harley Davidson (HOG) (-7.04%) and Netflix (NFLX) (-4.76%). The Nasdaq Composite ($COMPX) ended the session higher by 42.51 points, or 1.63%, on Tuesday and it closed at 2,657.43. The strongest performers in the Nasdaq-100 ($NDX) were Seagate Tech. (STX) (+7.08%), Micron Tech. (MU) (+6.26%), First Solar (FSLR) (+5.57%), and Joy Global (JOYG) (+5.47%). Ten of the index’s components posted a loss. The weakest were Netflix (NFLX) (-4.76%), Ctrip (CTRP) (-3.98%), and Baidu (BIDU) (-2.39%). Nasdaq Composite (Figure 3) Weekly Losses Wiped Out The market struggled initially heading into Tuesday’s session, but the larger intraday support pointed out in yesterday’s column held well. The index futures primarily congested overnight with only slightly lower lows. Instead of indicating underlying weakness, the slightly lower lows served as bear traps. Every time a new low hit, the market snapped back. At 10:00 a.m. ET the reversal finally held and the upper end of the trading channel that had been in place throughout premarket trade finally gave way. The pace of the buying slowed mid-day, but the report from The Guardian provided an added boost for the bulls in the final hour of trade. This wiped out the losses from the previous session. Outlook As we head into Wednesday’s session the markets are primarily favoring a trading range on the 60-minute time frame. The 200 day moving averages in the SandP 500 and Dow can still draw those indices higher, but the market will likely experience wider swings in intraday price action as debt and job crisis headlines continue to vie for a attention alongside earnings news. Swingtrades overnight at this time will be higher risk as a result.
ECONOMIC REPORTS AND EVENTS THIS WEEK
U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Oct 17 8:30 AM Empire Manufacturing Oct Oct 17 9:15 AM Industrial Production Sep Oct 17 9:15 AM Capacity Utilization Sep Oct 18 8:30 AM PPI Sep Oct 18 8:30 AM Core PPI Sep Oct 18 9:00 AM Net Long-Term TIC Flows Aug Oct 18 10:00 AM NAHB Housing Market Index Oct Oct 19 7:00 AM MBA Mortgage Index 10/15 Oct 19 8:30 AM CPI Sep Oct 19 8:30 AM Core CPI Sep Oct 19 8:30 AM Housing Starts Sep Oct 19 8:30 AM Building Permits Sep Oct 19 10:30 AM Crude Inventories 10/15 Oct 19 2:00 PM Fed’s Beige Book Oct Oct 20 8:30 AM Initial Claims 10/15 Oct 20 8:30 AM Continuing Claims 10/08 Oct 20 10:00 AM Existing Home Sales Sep Oct 20 10:00 AM Philadelphia Fed Oct Oct 20 10:00 AM Leading Indicators Sep International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Oct 16 19:01 GBP Rightmove House Prices (OCT) Oct 17 JPY Machine Tool Orders (SEP F) (SEP F) Oct 17 00:30 JPY Industrial Production (AUG F) Oct 17 09:15 USD Industrial Production (SEP) Oct 17 10:30 CAD Business Outlook Future Sales (3Q) Oct 17 10:30 CAD Band of Canada Senior Loan Officer Survey (3Q) Oct 17 20:30 AUD Reserve Bank’s Board October Minutes*** Oct 17 22:00 CNY Real GDP YTD (3Q)*** Oct 17 22:00 CNY Real GDP (3Q)*** Oct 17 22:00 CNY Industrial Production YTD (SEP) Oct 17 22:00 CNY Industrial Production (SEP) Oct 17 22:00 CNY Fixed Assets Inv Excl. Rural YTD (SEP) Oct 17 22:00 CNY Retail Sales YTD (SEP) Oct 17 22:00 CNY Retail Sales (SEP) Oct 18 GBP Nationwide Consumer Confidence (SEP) Oct 18 04:30 GBP Consumer Price Index (SEP)*** Oct 18 04:30 GBP Core Consumer Price Index (SEP) Oct 18 05:00 EUR German ZEW Survey (Current Situation) (OCT) Oct 18 05:00 EUR Euro-Zone ZEW Survey (Economic Sentiment) (OCT)*** Oct 18 08:30 USD Producer Price Index (SEP)*** Oct 18 08:30 USD Producer Price Index Ex Food and Energy (SEP)*** Oct 18 09:00 USD Net Long-term TIC Flows (AUG) Oct 18 12:30 USD Fed’s Bernanke Speaks in Boston *** Oct 19 00:30 JPY All Industry Activity Index (AUG) Oct 19 04:30 GBP Bank of England Minutes*** Oct 19 08:30 CAD Leading Indicators (SEP) Oct 19 08:30 USD Consumer Price Index (SEP)*** Oct 19 08:30 USD Consumer Price Index Ex Food and Energy (SEP)*** Oct 19 08:30 USD Housing Starts (SEP) Oct 19 08:30 USD Consumer Price Index Core Index s.a. (SEP) Oct 19 08:30 USD Building Permits (SEP) Oct 19 14:00 USD Fed Releases Beige Book Economic Survey Oct 20 01:00 JPY Leading Index (AUG F) Oct 20 02:00 EUR German Producer Prices (SEP)*** Oct 20 02:00 CHF Trade Balance (SEP) Oct 20 04:30 GBP Retail Sales (SEP) Oct 20 04:30 GBP Retail Sales w/Auto Fuel (SEP) Oct 20 05:00 CHF ZEW Survey (Expectations) (OCT) Oct 20 10:00 EUR Euro-Zone Consumer Confidence (OCT A) Oct 20 10:00 USD Leading Indicators (SEP) Oct 20 10:00 USD Philadelphia Fed. (OCT) Oct 20 10:00 USD Existing Home Sales (SEP) Oct 20 22:00 NZD Credit Card Spending s.a. (SEP) Oct 21 03:00 CHF Real Estate Index Family Homes (3Q) Oct 21 04:00 EUR German IFO – Business Climate (OCT) Oct 21 04:00 EUR German IFO – Current Assessment (OCT) Oct 21 04:00 EUR German IFO – Expectations (OCT) Oct 21 04:30 GBP Public Finances (PSNCR) (SEP) Oct 21 04:30 GBP PSNB ex Interventions (SEP) Oct 21 04:30 GBP Public Sector Net Borrowing (SEP) Oct 21 05:00 EUR Euro-Zone Government Debt-GDP Ratio (2010)*** Oct 21 07:00 CAD Consumer Price Index (SEP)*** Oct 21 07:00 CAD Bank Canada Consumer Price Index Core (SEP)*** Oct 21 07:00 CAD Consumer Price Index (SEP) *** Highly influential Notice: 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 17, 2011 Before: SCHW, C, FHN, GCI, HAL, HAS, WFC During: PHG After: BMI, ELS, ICUI, IBM, LNCR, MFI, PCBK, PKG, PRK, SWK, STLD, TESS, VMW, WDFC, WAL Tuesday, Oct 18, 2011 Before: ASRV, BAC, CHKP, KO, DPZ, EMC, FRX, GPC, GS, HOG, JAKK, JNJ, LBAI, MBWM, EDU, PH, PTI, PII, STT, UNF, UNH, GWW During: – After: AAPL, CREE, CCK, CSX, FLXS, FSII, FULT, HA, INFN, INTC, ISRG, JNPR, KED, LLTC, MANH, MRTN, PNFP, PTP, RNST, RLI, SONC, URI, WCN, WERN, YHOO Wednesday, Oct 19, 2011 Before: ABT, MO, APH, AMR, ATMI, BK, BLK, CMA, CTBI, DRH, FCFS, IPT, KCG, KNL, LUFK, MHH, MEG, MS, NGNM, NYB, NTRS, PJC, PNC, BPOP, ROC, SYBT, STJ, SCL, SVU, TXT, TRV, USB, UTX, VCBI, WNS During: ANCX, WABC After: EGHT, AXP, AMLN, AF, BANR, BWLD, CATY, CVCY, CAKE, CRUS, COHU, CLB, CVA, CBST, CVBF, DTLK, ETFC, EWBC, EBAY, EW, EXPO, FNB, FNF, FWRD, FSL, GLF, HNI, KMP, KMR, LRCX, LHO, MKSI, MCRI, NFX, NE, PLCM, RJF, RVBD, SLM, SCSS, SPTN, SYK, SWFT, TCBI, TSCO, WSTL, WDC, WHG, XLNX, ZHNE Thursday, Oct 20, 2011 Before: ALK, ALXN, ADS, ACO, T, AN, BLX, BAX, BBT, BX, BSX, BGG, CSH, CBE, CY, CYS, DHR, DO, LLY, ECA, FITB, FNFG, FRC, FLIR, GMT, GNTX, HAFC, HOMB, HBAN, IEX, IR, IIIN, ESI, JNS, KNSY, KEY, LH, LSTR, LTM, MNRO, MYE, NYT, NBL, NOK, NUE, PENN, PM, POOL, PPG, SASR, SJR, SFNC, SNA, SON, LUV, TCB, ERIC, TNB, UTEK, UMPQ, UNP, USAK, USG, UTMD, WFSL, WSO, WCC During: ALNC, FMFC After: SRCE, ACTG, APKT, ALTR, APOL, ASBC, ATHN, TBBK, BAS, BJRI, BLDR, CALX, COF, CPHD, CMG, CB, CYN, CPWR, CYMI, CYT, EGP, EFII, FFIN, FLEX, GDI, HITT, INDB, INFA, IBKR, LSCC, MXIM, MBFI, MSFT, NTCT, OCFC, PBCT, PXLW, PFBC, PGI, RMTR, RRR, SNDK, SCHN, SBCF, STX, STLY, SYNA, TCO, TPX, WSCI Friday, Oct 21, 2011 Before: AOS, APD, GE, HAR, HON, IDXX, KSU, KCI, MAN, MNI, MUSA, PDS, PRSP, SLB, SXT, STI, UBNK, VZ During: – After: MCBI 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=
