October 12, 2011
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DAILY COMMENTARY
Earnings Season Kicks Off (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 12, 2011 (1:45 a.m. ET): Closing Prices: DOW 11,416.30 (-16.18, -0.15%), SandP 500 1,195.54 (+0.65, +0.05%), NASDAQ 2,583.03 (+16.98, +0.66%), Nikkei 225 8,754.40 (-19.28, -0.22), DAX 5,865.01 (+17.72, +0.3%), FTSE 5,395.70 (-3.30, -0.06%) OIL 85.60, GOLD 1,669.80, SILVER 32.22 EURO 1.3632, YEN 76.70, BRITISH POUND 1.5582, U.S. DOLLAR INDEX 77.99 Bulls Hold Their Breath The market has been on a roar since putting in a short-term bottom on October 4th, but the indices have struggled since late Monday morning to make further head-way. Tuesday’s session ended up being a rather mellow one. Volume was light compared to the average of the past several months and the day’s trading range was also a lot narrower.
The index futures were trading lower ahead of the open, but rallied to push through Monday’s closing high within the first hour and fifteen minutes of the regular trading session on Tuesday. Technology shares led the morning rally in the indices. This gave the Nasdaq a lead over the Dow and SandP 500. The morning rally in the Nasdaq took it to equal move resistance on the 15 minute time frame at 10:45 a.m. ET. This is a typical correction period intraday and morning highs (and lows) are often made at this time of the day. The market did not fully reverse at this point, but the Dow also struck resistance at Monday’s highs and a brief retracement of the day’s gains followed.
After 10:45 a.m. ET the range for the session narrowed. Support and resistance levels held quite well and there were clear-cut reversal patterns (such as 2 minute Momentum Reversals) on the 5 minute time frame off the upper and lower end of the trading range, but reward to risk ratios were diminished due to continued volatility as seen by the high degree of overlap from one bar to the next on the 5 and 15 minute time frames. A lesser degree of overlap in price means that there is a better chance to select correct entry, stop, and target/exit levels with reduced risk of mismanaging a trade.
INDEX WRAPUP The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a gain of 330.06 points, or 2.97%, and closed at 11,433.18. Just over a third of the Dow’s thirty index components posted a gain. The top performers were Alcoa (AA) (+2.08%), Caterpillar (CAT) (+1.93%), and Bank of America (BAC) (+1.43%). ATandT (T) (-1.37%), Travelers Companies (TRV) (-1.33%), and Merck (MRK) (-1.30%). The SandP 500 ($SPX) finished the session with a gain of 39.43 points, or 3.41%, and closed at 1,194.89. The top percentage performers in the index were Sprint Nextel Corp. (S) (+7.21%), Citrix Systems (CTXS) (+5.50%), Citigroup (C) (+5.10%), and Goodyear Tire and Rubber (GT) (+4.67%). The weakest were First Solar (FSLR) (-6.47%), CME Group (CME) (-3.41%), and Kohls Corp. (KSS) (-3.21%). The Nasdaq Composite ($COMPX) ended the session higher by 86.70 points, or 3.5%, on Tuesday and it closed at 2,566.05. The strongest performers in the Nasdaq-100 ($NDX) were Citrix Systems (CTXS) (+5.50%), Research In Motion (RIMM) (+5.08%), and Baidu (BIDU) (+3.96%). The weakest were First Solar (FSLR) (-6.47%), Netflix (NFLX) (-2.65%), and Gilead (GILD) (-2.34%).
Earnings Season Kicks Off Over the past several weeks the market has been focusing heavily upon the European debt crisis and the employment situation in the States, but this week brings another focus: earnings. Alcoa (AA) kicked off earnings season with revenue that beat expectations, but it fell short on its reported earnings of 15 cents a share. This week will still be light on the number of companies reporting earnings, but among the top names reporting this week are PepsiCo (PEP) on Wednesday morning, JP Morgan (JPM) Thursday morning, and Google (GOOG) following the close on Thursday afternoon. Over the course of this earnings season, companies in the SandP 500 are expected to have risen between 12-13% for Q3 2011 with revenue up 10% (according to Thomson Reuters).
OUTLOOK
Wednesday will be a session where it will be necessary to pay attention to smaller, intraday trends for direction. The market is at a strong resistance zone on the daily charts short-term, but there is room for both the SandP 500 and Dow Jones Ind. Average to push through it to their 100 day moving averages before offering up a larger correction from this recent rally than a pull back to 60-minute 20 period moving averages, which is the support zone from last week’s correction. Momentum in the early morning hours heading into Wednesday is more supportive of the bears on the 5-15 minute time frames, but this could easily shift as Wednesday’s open approaches to allow for a third wave of buying on the 60-minute time frame. Overall, however, we should expect the next pullback on the daily time frame to have a more gradual pace than the rally that has taken place since October’s lows hit last week.
ECONOMIC REPORTS AND EVENTS THIS WEEK
U.S. Domestic: Eastern Time Zone (GMT -5:00) (New York, Toronto)
Oct 12 7:00 AM MBA Mortgage Index 10/08
Oct 12 2:00 PM FOMC Minutes Sep. 21 Oct 13 8:30 AM Initial Claims
10/08 Oct 13 8:30 AM Continuing Claims 10/01
Oct 13 8:30 AM Trade Balance Aug
Oct 13 11:00 AM Crude Inventories 10/08
Oct 13 2:00 PM Treasury Budget Sep
Oct 14 8:30 AM Retail Sales Sep
Oct 14 8:30 AM Retail Sales ex-auto Sep
Oct 14 8:30 AM Export Prices ex-ag. Sep
Oct 14 8:30 AM Import Prices ex-oil Sep
Oct 14 9:55 AM Mich Sentiment Oct
Oct 14 10:00 AM Business Inventories Aug International: Eastern Time Zone (GMT -4:00) (New York, Toronto)
Oct 10 CNY Actual FDI (SEP) Oct 10 NZD REINZ House Sales (SEP)
Oct 10 02:00 EUR German Trade Balance (AUG)
Oct 10 04:30 EUR Euro-Zone Sentix Investor Confidence (OCT)
Oct 10 17:45 NZD NZ Card Spending – Retail (SEP)
Oct 10 17:45 NZD NZ Card Spending (SEP)
Oct 10 19:01 GBP RICS House Price Balance (SEP)
Oct 10 19:50 JPY Trade Balance – BOP Basis (AUG)
Oct 10 20:30 AUD NAB Business Confidence (SEP)
Oct 11 CNY Foreign Exchange Reserves (SEP)
Oct 11 CNY New Yuan Loans (SEP
Oct 11 JPY Machine Tool Orders (SEP P)
Oct 11 00:30 JPY Bankruptcies (SEP)
Oct 11 01:00 JPY Bank of Japan Monthly Economic Report
Oct 11 01:00 JPY Consumer Confidence (SEP)
Oct 11 02:00 JPY Eco Watchers Survey: Current (SEP)
Oct 11 02:00 JPY Eco Watchers Survey: Outlook (SEP)
Oct 11 04:30 GBP Industrial Production (AUG)
Oct 11 04:30 GBP Manufacturing Production (AUG)
Oct 11 08:15 CAD Housing Starts (SEP)
Oct 11 10:00 GBP NIESR Gross Domestic Product Estimate (SEP)
Oct 11 14:00 USD Fed Releases Minutes of Sep. 20 FOMC Meeting
Oct 11 19:30 AUD Westpac Consumer Confidence (OCT)
Oct 11 19:50 JPY Machine Orders (AUG)
Oct 11 20:30 AUD Home Loans (AUG)
Oct 12 USD Monthly Budget Statement (SEP)
Oct 12 04:30 GBP Claimant Count Rate (SEP)
Oct 12 04:30 GBP Jobless Claims Change (SEP)
Oct 12 04:30 GBP Average Weekly Earnings (AUG)
Oct 12 04:30 GBP ILO Unemployment Rate (3M) (AUG)
Oct 12 05:00 EUR Euro-Zone Industrial Production w.d.a. (AUG)
Oct 12 17:30 NZD Business NZ Performance of Manufacturing Index (SEP)
Oct 12 19:50 JPY BOJ to Publish Minutes of Sept. 6-7 Board Meeting
Oct 12 19:50 JPY Tertiary Industry Index (AUG)
Oct 12 20:30 AUD Employment Change (SEP)
Oct 12 20:30 AUD Unemployment Rate (SEP)
Oct 12 20:30 AUD Full Time Employment Change (SEP)
Oct 12 20:30 AUD Part Time Employment Change (SEP)
Oct 12 22:00 CNY Business Climate Index (3Q)
Oct 12 22:00 CNY Trade Balance (SEP)
Oct 13 02:00 EUR German Consumer Price Index (SEP F)
Oct 13 02:00 EUR German Consumer Price Index – EU Harmonised (SEP F)
Oct 13 04:00 EUR ECB Publishes Oct. Monthly Report
Oct 13 04:30 GBP Visible Trade Balance (AUG)
Oct 13 08:30 USD Trade Balance (AUG)
Oct 13 22:00 CNY Consumer Price Index (SEP)
Oct 13 22:00 CNY Producer Price Index (SEP)
Oct 14 05:00 EUR Euro-Zone Consumer Price Index – Core (SEP)
Oct 14 05:00 EUR Euro-Zone Consumer Price Index (SEP)
Oct 14 08:30 USD Advance Retail Sales (SEP)
Oct 14 08:30 USD Retail Sales Less Autos (SEP)
Oct 14 08:30 USD Retail Sales Ex Auto and Gas (SEP)
Oct 14 09:55 USD U. of Michigan Confidence (OCT P)
Oct 14 10:00 USD Business Inventories (AUG)
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, Oct 10, 2011 Before: – During: – After: AUGT Tuesday, Oct 11, 2011 Before: ADTN During: RMCF After: AA, VOXX, EXFO, JOEZ, SURG Wednesday, Oct 12, 2011 Before: ASML, HST, INFY, PEP During: BKSC After: OZRK, ODC, UFPI Thursday, Oct 13, 2011 Before: CBSH, EMMS, FCS, FAST, JPM, LNN, MTOX, SWY, WGO, ZEP During: – After: GOOG, JBHT, NKSH, VMI Friday, Oct 14, 2011 Before: MAT, WBS During: ATLO 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. 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. © 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=
