Market Faces Challenges Stuck Between S/R Levels – Daily commentary by Toni Hansen

February 2, 2011

An online version of this newsletter is available at http://www.tonihansen.com/Newsletters/current.html.

DAILY COMMENTARY

Market Holds Onto Support (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 February 1, 2011 (9:05 p.m. ET): Closing Prices: DOW 12,716.46 (+83.55, +0.66%), SandP 500 1,324.08 (+11.67, +0.89%), NASDAQ 2,848.27 (+34.43 +1.22%), Nikkei 225 8,880.19 (+70.40, +0.8%), DAX 6,616.64 (+157.73, +2.44%), FTSE 5,790.72 (+109.11, +1.92%) OIL 97.56, GOLD 1,752.40, SILVER 33.825 EURO 1.3181,YEN 76.13, BRITISH POUND 1.585, U.S. DOLLAR INDEX 78.895

Dow Jones Inds. and SandP 500 Hit 20-Day SMA The market has continued to chug its way higher into the next month with a solid start on Wednesday. A rally in Europe following a report on slowing inflation boosted the index futures, leading a strong opening gap to kick off the session. Tuesday’s highs served as resistance in premarket trade, but congestion along those highs from 4:30 a.m. ET into the opening bell allowed the market to rest just long enough to manage another break higher shortly after the open.

ISM Data Offers Further Encouragement The market rally picked up once again following the 10:00 a.m. ET economic data on Wednesday morning. According to the Institute for Supply Management, business at U.S. manufacturers expanded in January at its fastest pace in eight months. Additionally, construction spending was up 1.5% in December.

The rally out of the morning data was not as extreme as seen in premarket trade following the European open. While the premarket congestion was long enough to allow for a breakout, it was not enough to fully correct from the earlier gains, making it difficult for the market to mount another push higher with the same momentum.

Nevertheless, the move was still impressive point-wise and the indices managed one of the strongest sessions of the year-to-date. Slowing momentum allowed the market to break its uptrend channel mid-day, resulting in a pullback into the closing bell. The SandP 500 and Dow Jones Ind. Average experienced a stronger correction than the Nasdaq, which has continued to outperform throughout the year. While the SandP 500 and Dow both pulled back to 20-day moving average support this week, the Nasdaq has yet to do more than test its 10-day moving average this year.

INDEX WRAP-UP

The Dow Jones Industrial Average ($DJI) ended the day on Wednesday with a gain of 83.55 points, or 0.66%, and closed at 12,716.46. Twenty-seven of the Dow’s thirty index components posted a gain. The top performers were Bank of America (BAC) (+3.23%), Hewlett-Packard (HPQ) (+2.79%), and United Technologies Corp. (UTX) (+2.39%). The top only shares posting a loss were McDonald’s (MCD) (-0.66%), Johnson and Johnson (JNJ) (-0.33%), and Chevron Corp. (CVX) (-0.32%). The SandP 500 ($SPX) finished the session with a gain of 11.67 points, or 0.89%, and closed at 1,324.08. Out of the index’s ten industry groups, the strongest were the financials (+1.7%), industrials (+1.1%), and materials (+1.1%). There were no declining industry groups. The top individual percentage performer in the index was Whirlpool (WHR), which rose 13.48% after it raised its 2012 earnings guidance. WHR was followed by strong performances in Marathon Pete. Corp. (MPC) (+9.58%), and Broadcom Corp. (BRCM) (+8.09%). BRCM also raised its earnings guidance for the year. The top decliner was Amazon.com (AMZN) (-7.70%) after raising concerns that it would post a loss in the first quarter after missing estimates last quarter. Other top decliners were CH Robinson Worldwide (CHRW) (-7.02%) and Southwestern Energy Co. (SWN) (-2.34%). The Nasdaq Composite ($COMPX) ended the session higher by 34.43 points, or 1.22%, on Wednesday and it closed at 2,848.27. The strongest performer in the Nasdaq-100 ($NDX) was Seagate Technology (STX) (+20.77%). It was followed by gains in Broadcom Corp. (BRCM) (+8.09%) and Mylan Inc. (MYL) (+5.88%). The weakest were Amazon.com (AMZN) (-7.70%), CH Robinson Worldwide (CHRW) (-7.02%), and Activision Blizzard Inc. (ATVI) (-1.46%).

Earnings Impress The market was up further afterhours on Wednesday after strong earnings from Qualcomm (QCOM), Green Mountain Coffee Roasters (GMCR), and Allstate (ALL). GMCR shares jumped 22% after it posted earnings of 60 cents a share (18 cents higher than the previous year) and revenue growth of 102%, beating the Street estimates. GMCR saw its share prices plummet from over $115 a share in September to under $35 by November last year. It’s set to open over $65 a share Thursday morning. Outlook The market momentum continued to slow afterhours on Wednesday despite the above-mentioned earnings. Only the Nasdaq managed a higher high, but the highs were only slightly higher. This created a bull trap and further shifted the momentum of the day’s rally. The result was a Momentum Reversal following Europe’s open and a pullback in the Nasdaq to its premarket congestive levels from Wednesday morning. The Dow and SandP 500 have also found support at this congestion zone heading into Thursday morning. This will continue to serve as support throughout the remainder of the morning, while last week’s highs in the Dow will serve as market resistance. We have not yet seen a strong pattern develop for a break in the current daily uptrend, but new multi-day positions in that direction gain risk with each passing day as the market comes closer and closer to a stronger daily correction.

ECONOMIC REPORTS AND EVENTS THIS WEEK

U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto) Jan 31 8:30 AM Employment Cost Index Q4 Jan 31 9:00 AM Case-Shiller 20-city Index Nov Jan 31 9:45 AM Chicago PMI Jan Jan 31 10:00 AM Consumer Confidence Jan Feb 1 7:00 AM MBA Mortgage Index 01/28 Feb 1 8:15 AM ADP Employment Change Jan Feb 1 10:00 AM ISM Index Jan Feb 1 10:00 AM Construction Spending Dec Feb 1 10:30 AM Crude Inventories 01/28 Feb 1 2:00 PM Auto Sales Jan Feb 1 2:00 PM Truck Sales Jan Feb 2 7:30 AM Challenger Job Cuts Jan Feb 2 8:30 AM Initial Claims 01/28 Feb 2 8:30 AM Continuing Claims 01/21 Feb 2 8:30 AM Productivity-Prel Q4 Feb 2 8:30 AM Unit Labor Costs Q4 Feb 3 8:30 AM Nonfarm Payrolls Jan Feb 3 8:30 AM Nonfarm Private Payrolls Jan Feb 3 8:30 AM Unemployment Rate Jan Feb 3 8:30 AM Hourly Earnings Jan Feb 3 8:30 AM Average Workweek Jan Feb 3 10:00 AM Factory Orders Dec Feb 3 10:00 AM ISM Services Jan International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Jan 31 EUR German Consumer Price Index (JAN P)*** Jan 31 00:00 JPY Annualized Housing Starts (DEC) Jan 31 00:00 JPY Housing Starts (DEC) Jan 31 EUR German Retail Sales (DEC) Jan 31 02:00 CHF UBS Consumption Indicator (DEC) Jan 31 03:55 EUR German Unemployment Change (JAN)*** Jan 31 03:55 EUR German Unemployment Rate s.a. (JAN) Jan 31 04:30 GBP Net Consumer Credit (DEC) Jan 31 04:30 GBP Net Lending Sec. on Dwellings (DEC) Jan 31 04:30 GBP Mortgage Approvals (DEC) Jan 31 05:00 EUR Euro-Zone Unemployment Rate (DEC) Jan 31 08:30 CAD Gross Domestic Product (NOV)*** Jan 31 10:00 USD Consumer Confidence (JAN) Jan 31 17:30 AUD AiG Performance of Manufacturing Index (JAN) Jan 31 19:00 AUD HIA New Home Sales (DEC) Jan 31 19:30 AUD House Price Index (4Q) Jan 31 20:00 CNY PMI Manufacturing (JAN)*** Jan 31 20:30 JPY Labor Cash Earnings (DEC) Feb 01 02:00 GBP Nationwide House Prices n.s.a. (JAN) Feb 01 03:15 CHF Retail Sales (Real) (DEC) Feb 01 03:30 CHF SVME-Purchasing Managers Index (JAN) Feb 01 03:55 EUR German Purchasing Manager Index Manufacturing (JAN F) Feb 01 04:00 EUR Euro-Zone Purchasing Manager Index Manufacturing (JAN F) Feb 01 04:30 GBP Purchasing Manager Index Manufacturing (JAN) Feb 01 05:00 EUR Euro-Zone Consumer Price Index Estimate (JAN) Feb 01 08:15 USD ADP Employment Change (JAN) Feb 01 10:00 USD Construction Spending (DEC) Feb 01 10:00 USD ISM Manufacturing (JAN)*** Feb 01 10:00 USD ISM Prices Paid (JAN) Feb 01 19:30 AUD Trade Balance (DEC) Feb 02 02:00 CHF Trade Balance (DEC) Feb 02 04:30 GBP Purchasing Manager Index Construction (JAN) Feb 02 05:00 EUR Euro-Zone Producer Price Index (DEC)*** Feb 02 10:00 USD Fed’s Bernanke Testifies Before House Budget Committee*** Feb 02 17:30 AUD AiG Performance of Service Index (JAN) Feb 02 20:00 CNY China Non-manufacturing PMI (JAN) Feb 03 USD ICSC Chain Store Sales (JAN) Feb 03 CNY Industrial Profits YTD (DEC) Feb 03 02:00 CHF UBS Real Estate Bubble Index (4Q) Feb 03 03:55 EUR German Purchasing Manager Index Services (JAN F) Feb 03 04:00 EUR Euro-Zone Purchasing Manager Index Composite (JAN F) Feb 03 04:00 EUR Euro-Zone Purchasing Manager Index Services (JAN F) Feb 03 04:30 GBP Purchasing Manager Index Services (JAN) Feb 03 05:00 EUR Euro-Zone Retail Sales (DEC)*** Feb 03 07:00 CAD Unemployment Rate (JAN)*** Feb 03 07:00 CAD Net Change in Employment (JAN)*** Feb 03 07:00 CAD Full Time Employment Change (JAN) Feb 03 07:00 CAD Part Time Employment Change (JAN) Feb 03 07:00 CAD Participation Rate (JAN) Feb 03 08:30 USD Change in Non-farm Payrolls (JAN)*** Feb 03 08:30 USD Change in Private Payrolls (JAN) Feb 03 08:30 USD Change in Manufacturing Payrolls (JAN) Feb 03 08:30 USD Unemployment Rate (JAN)*** Feb 03 08:30 USD Avg Hourly Earning All Employees (JAN) Feb 03 08:30 USD Avg Weekly Hours All Employees (JAN) Feb 03 08:30 Underemployment Rate (U6) (JAN) Feb 03 10:00 USD ISM Non-Manufacturing Composite (JAN) Feb 03 10:00 USD Factory Orders (DEC) *** 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, Jan 30, 2012 Before: ARW, CAJ, CFFN, CHFC, GCI, HAE, PHG, KYO, ONB, SIFY, TNB, WEN, WWW During: PEBK After: BIRT, AEIS, ALGN, ARRY, BMTC, EEQ, EEP, FFCH, FIBK, GGG, HTLF, HOLX, ICUI, IDTI, KRC, MCK, MSPD, NAVR, OLN, OFG, PRXL, PXLW, PCL, RGA, RCII, RTEC, SLG, SOA, SCMF, SFG, TGI Tuesday, Jan 31, 2012 Before: AXE, ADM, ARMH, AVY, BIIB, CPLP, CE, CEVA, CIT, CNH, DHR, LLY, ETR, XOM, FHCO, GKSR, GNTX, HRS, HHS, HW, HP, HMC, ITW, KLIC, LLL, LXK, MKTAY, HZO, MAT, MHP, OSK, PCAR, PNR, PFE, PCH, RTIX, SAIA, TECH, TLAB, TYC, UPS, X, VLO, WDR During: EOC, ENI After: ACE, AFL, AFOP, AMZN, AMCC, AJG, AZPN, BHLB, BBOX, BXP, BRCM, CHRW, BCR, CYT, DLB, EXAR, FFIC, FTNT, GLAD, GFF, HLIT, HA, ILMN, IVAC, INYS, JKHY, JDAS, JLL, KTCC, KEYN, LFL, MANH, MTW, MPW, MTH, MSL, MWA, MTGN, NATI, PSEM, PLT, QGEN, RSYS, STX, SLGN, STLY, UBNT, UIS, VRTU, WBSN, WRB Wednesday, Feb 1, 2012 Before: AET, ASCA, AOL, ATMI, AUDC, ALV, BEAV, BOKF, BBNK, GIB, CVLT, COCO, DSPG, ENR, ENTG, EPD, BEN, HFWA, HSY, HVB, IACI, ITG, KFFG, LQDT, MAN, MDCI, MGAM, NDAQ, NI, NOC, OIIM, PGC, RDWR, ST, SU, TMO, TUP, VHS, WHR During: CCNE, MRO After: ADEP, ABCO, ALGT, ALL, DOX, AFG, AMP, AIZ, ATW, AVB, AVNW, BYI, SAN, BMC, CELL, CBT, CACI, CDNS, CRME, CVCY, CMG, COHU, CNQR, CLB, CMRE, CVTI, CCK, EA, EXXI, EQR, EXPO, FBHS, FXCB, GAIN, GMCR, GTAT, HAIN, HWKN, HI, ININ, ISH, ISIL, JDSU, JBSS, KMPR, LVS, MX, MDU, MEAS, MERU, MKSI, NQ, NWK, NEU, OTEX, OPWV, QCOM, QNST, RLD, REG, RBNF, SWM, SHOR, SFLY, SYA, TSO, TTEK, TSCO, TRH, VASC Thursday, Feb 2, 2012 Before: ACM, AGN, ADS, ATK, AZN, BWINB, BZH, BHE, BX, BSX, CAM, CAH, CSL, CI, CME, CMI, DB, DO, DHX, DOW, EXP, RDEN, EVR, GR, IBCP, IP, IVC, K, KELYA, KEM, KNSY, LSTR, LEA, LII, MDC, MA, MMS, MD, MRK, MTOR, MSCI, NOV, NCI, NTWK, NYT, NUS, ODFL, PTEN, PENN, PHM, RSTI, ROP, RCL, RGLD, R, SBH, SLE, SNA, SNE, SE, HOT, SPH, SXC, SYNL, TE, TEN, BCO, TDW, TRCR, VIAB, WBC, WEC, XEL During: BOFI After: APKT, BEBE, BKH, BRS, CLMS, CPT, CATM, CFN, CVCO, CAVM, COLM, CNW, CTCT, BAP, CYMI, DRIV, EW, EXTR, FISV, FLXS, GNW, GIGA, GILD, HPOL, IKAN, INFN, IN, IRF, ITI, XXIA, KEX, BOOT, MCHP, MAA, MTX, MTSC, MFLX, NFG, N, NSR, EGOV, NVLS, OCLS, OPLK, OESX, PCCC, PKI, POWI, PWER, PFG, RDK, SIGI, SIMG, SIMO, SSD, SMT, SPAN, SRCL, TTWO, TSYS, EDE, THQI, TRMB, USLM, UTI, VR, VRTX, WSTG, WHG, ZIGO Friday, Feb 3, 2012 Before: AXL, BEAM, BAH, CLX, UFS, RDY, EL, HNT, HRG, KBALB, MAC, MOD, MGI, OB, PC, SPG, SIRO, SEP, SPB, TSN, WY

During: – After: CBNJ, WGL Note: All economic 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=