November 16, 2011
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Filtering Gaps to Locate High Probability Momentum Trades
Friday, November 18 1:15 pm–2:15 pm PST
DAILY COMMENTARY
Another Advantageous Day for Day-Traders (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 November 15, 2011 (10:42 a.m. ET): Closing Prices: DOW 12,096.16 (+17.18, +0.14%), SandP 500 1,257.81 (+6.03, +0.48%), NASDAQ 2,686.98 (+28.98, +1.09%), Nikkei 225 8,541.93 (-, -%), DAX 5,933.14 (-51.88, -0.87%), FTSE 5,517.44 (-1.704, -0.03%) OIL 99.30, GOLD 1,780.50, SILVER 34.455 EURO 1.3508,YEN 77.04, BRITISH POUND 1.5805, U.S. DOLLAR INDEX 78.06 Market Provides Solid Setups for Intraday Traders This week has been a good one for daytraders, while providing a beating to those looking for multi-day runs. As the market congests on the daily time frame, support and resistance levels at prior highs and lows, fibonacci, and moving average levels have all held extremely well and price patterns on the intraday time frames have offered decent reward to risk ratios without a lot of choppy action, although Tuesday afternoon was a bit slow as the Momentum Reversal on the 15 minute time frame developed. Tuesday morning began with strength after the index futures sold off in response to European weakness in premarket trade. Downside gaps filled quickly, but the market had been down even further in early trade, leaving the indices at resistance fairly early into intraday trade. The response was a two-wave correction on the 15 minute time frame throughout most of the morning before the indices found support at 15 minute 20 sma levels around 11:30 ET. The upside reaction was strong and the market established an equal move on the 15 minute time frame as compared to premarket buying before stalling into afternoon trade. Slowing momentum at this resistance tilted the favor once again to the bears and the market was poised for another selloff heading into the closing bell. Dow Jones Industrial Average (Figure 1) Tuesday’s Data Retail sales rose by 0.5% in October, which was just over the 0.4% increase analyst’s were anticipating. Excluding autos, sales were up 0.6%. An increase of 0.2% had been expected. Meanwhile, the Producer Price Index declined 0.3% in October. A 0.2% decline had been expected. The Core Producer Price Index was flat. Meanwhile, the Empire State Manufacturing Survey improved from -8.5 to 0.6. Finally, business inventories for September were flat. SandP 500 (Figure 2) Index Wrap-up The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a gain of 17.18 points, or 0.14%, and closed at 12,096.16. Twenty-three of the Dow’s thirty components posted a gain. The top performers were Hewlett-Packard (HPQ) (+3.37%), Intel (INTC) (+2.88%), Bank of America (BAC) (+1.32%), and American Express (AXP) (+1.01%). The weakest were Chevron (CVX (-2.73%) and Wal-Mart (WMT) (-2.43%). Wal-Mart (WMT) collapsed following a weaker-than-anticipated earnings report that weighed heavily on the Dow. Further corrective action in Wal-Mart is likely over the next several months and it will face difficulty establishing new highs this year. The SandP 500 ($SPX) finished the session with a gain of 6.03 points, or 0.48%, and closed at 1,257.81. The strongest industry sectors for the day were the tech stocks (+1.3%) and industrials (+0.6%). The strongest individual percentage performers in the index were Jacobs Engineering Group (JEC) (+7.94%), Varian Medical Systems (VAR) (+6.22%), and Vulcan Materials Co. (VMC) (+5.46%). The only declining sector was energy (-0.2%), while the weakest individual performers were Western Digital Corp. (WDC) (-4.90%), Gamestop Corp. (GME) (-4.38%), and Staples (SPLS) (-3.64%). The Nasdaq Composite ($COMPX) ended the session higher by 28.98 points, or 1.09%, on Tuesday and it closed at 2,686.20. The top index components in the Nasdaq-100 ($NDX) were Green Mountain Coffee Roasters (GMCR) (+12.98%), Research In Motion (RIMM) (+4.59%), and Broadcom (BRCM) (+4.14%). The weakest were Ctrip.com Intl. (CTRP) (-8.35%), Activision Blizzard (ATVI) (-4.53%), and Staples (SPLS) (-3.64%). Nasdaq Composite (Figure 3) OUTLOOK Getting Technical The strong selling that followed Tuesday’s close will leave the index futures once again extended on the 15 minute time frame heading into early Wednesday morning. The downside momentum has been stronger than the selloff into Monday’s lows, which confirms a bias continuing to favor the bears even though the daily trading range from this month remains unbroken and the lows of the range will continue to serve as support at this point. The early-morning action heading into Wednesday should experience a slowdown in the afterhours selloff and congestion into Wednesday’s open is likely. Oil Approaching Major Weekly Resistance Crude oil has been pushing higher with steady upside since the beginning of October. It is now approaching July’s highs, however, which is a strong level of price resistance. This will also be a 61.8% fibonacci retracement back to the year’s highs. This will make it difficult to continue the move without a weekly correction kicking off by the end of the this week. NOTE: I will be in Las Vegas over the next several days where I’ll be speaking at the Intl. Trader’s Expo. This column will resume next week. I hope to see some of you there!
ECONOMIC REPORTS AND EVENTS THIS WEEK
Nov 15 8:30 AM PPI Oct Nov 15 8:30 AM Core PPI Oct Nov 15 8:30 AM Retail Sales Oct Nov 15 8:30 AM Retail Sales ex-auto Oct Nov 15 8:30 AM Empire Manufacturing Nov Nov 15 10:00 AM Business Inventories Sep Nov 16 7:00 AM MBA Mortgage Index 11/12 Nov 16 8:30 AM CPI Oct Nov 16 8:30 AM Core CPI Oct Nov 16 9:00 AM Net Long-Term TIC Flows Sep Nov 16 9:15 AM Industrial Production Oct Nov 16 9:15 AM Capacity Utilization Oct Nov 16 10:00 AM NAHB Housing Market Index Nov Nov 16 10:30 AM Crude Inventories 11/12 Nov 17 8:30 AM Initial Claims 11/12 Nov 17 8:30 AM Continuing Claims 11/05 Nov 17 8:30 AM Housing Starts Oct Nov 17 8:30 AM Building Permits Oct Nov 17 10:00 AM Philadelphia Fed Nov Nov 18 10:00 AM Leading Indicators Oct International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Nov 13 CNY New Yuan Loans (OCT)*** Nov 13 16:45 NZD Retail Sales Ex Inflation (3Q) Nov 13 18:50 JPY Nominal Gross Domestic Product (3Q P)*** Nov 13 18:50 JPY Gross Domestic Product Annualized (3Q P)*** Nov 13 18:50 JPY Gross Domestic Product (3Q P)*** Nov 13 23:30 JPY Industrial Production (SEP F) Nov 14 CNY Actual FDI (OCT) Nov 14 05:00 EUR Euro-Zone Industrial Production w.d.a. (SEP) Nov 14 19:30 AUD Reserve Bank’s Board November Minutes*** Nov 15 GBP Nationwide Consumer Confidence (OCT) Nov 15 02:00 EUR German Gross Domestic Product n.s.a. (3Q P)*** Nov 15 04:30 GBP Consumer Price Index (OCT)*** Nov 15 04:30 GBP Core Consumer Price Index (OCT)*** Nov 15 05:00 EUR Euro-Zone Gross Domestic Product s.a. (3Q A)*** Nov 15 05:00 EUR German ZEW Survey (Current Situation) (NOV) Nov 15 05:00 EUR Euro-Zone ZEW Survey (Economic Sentiment) (NOV)*** Nov 15 05:00 EUR German ZEW Survey (Economic Sentiment) (NOV)*** Nov 15 08:30 USD Producer Price Index (OCT) Nov 15 08:30 USD Producer Price Index Ex Food and Energy (OCT) Nov 15 08:30 USD Advance Retail Sales (OCT)*** Nov 15 08:30 USD Retail Sales Less Autos (OCT) Nov 15 08:30 USD Retail Sales Ex Auto and Gas (OCT) Nov 15 10:00 USD Business Inventories (SEP) Nov 16 JPY Bank of Japan Rate Decision (NOV 16)*** Nov 16 04:30 GBP Claimant Count Rate (OCT) Nov 16 04:30 GBP Jobless Claims Change (OCT)*** Nov 16 04:30 GBP Average Weekly Earnings (SEP) Nov 16 04:30 GBP ILO Unemployment Rate (SEP) Nov 16 05:00 EUR Euro-Zone Consumer Price Index – Core (OCT)*** Nov 16 05:00 EUR Euro-Zone Consumer Price Index (OCT)*** Nov 16 08:30 USD Consumer Price Index (OCT)*** Nov 16 08:30 USD Consumer Price Index Ex Food and Energy (OCT)*** Nov 16 09:00 USD Net Long-term TIC Flows (SEP) Nov 16 09:15 USD Industrial Production (OCT) Nov 16 19:30 AUD Average Weekly Wages (AUG) Nov 17 01:00 JPY Machine Tool Orders (OCT F) Nov 17 04:30 GBP Retail Sales (OCT) Nov 17 04:30 GBP Retail Sales w/Auto Fuel (OCT) Nov 17 05:00 CHF ZEW Survey (Expectations) (NOV) Nov 17 08:30 USD Housing Starts (OCT) Nov 17 08:30 USD Building Permits (OCT) Nov 18 EUR Euro-Zone Consumer Confidence (NOV A) Nov 18 02:00 EUR German Producer Prices (OCT) Nov 18 02:00 EUR German Producer Prices (OCT)*** Nov 18 07:00 CAD Consumer Price Index (OCT)*** Nov 18 07:00 CAD Bank Canada Consumer Price Index Core (OCT)*** Nov 18 07:00 CAD Consumer Price Index (OCT) Nov 18 08:30 CAD Leading Indicators (OCT) Nov 18 10:00 USD Leading Indicators (OCT)
*** 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, Nov 14, 2011 Before: CTFO, CVV, DYN, GAXC, GSL, HSKA, ISS, JCP, OW, BRD, NOOF, SVA, SORL, SNSS, TPI, URRE During: ATEA, CALI, GPRC, HWBK, NSU After: VNET, API, AGO, ATHX, CXM, ERP, CIG, CYCC, CMXI, DRJ, EFUT, EFOI, EDS, FSI, GGR, GLAD, GLPW, HSFT, HOLI, IOC, JNGW, MOTR, PCYG, RMKR, SUTR, TPCS, TNGN, URBN, VISN, ZAGG Tuesday, Nov 15, 2011 Before: BZH, CVVT, CXDC, CLNT, CRRC, GILT, HD, JEC, LRN, MTOR, MIL, CEL, PTX, SKS, SPLS, TJX, TSEM, VIT, WMT During: – After: A, ASYS, CNQR, DWCH, DELL, GBG, JADE, UNTK Wednesday, Nov 16, 2011 Before: IMOS, CRWS, EDAP, HRG, ITRN, MAG, SPB, TYC, ZLTQ During: – After: AMAT, DL, LTD, NTAP, TFSL Thursday, Nov 17, 2011 Before: AMAP, BONT, CMRG, PLCE, DEST, DLTR, DCI, SJM, SSI, BKE During: – After: ARUN, ATW, DLB, FMCN, GPS, GIGM, INTU, JHX, MENT, NWY, NED, SCVL, WTSLA Friday, Nov 18, 2011 Before: ANN, BRC, CMED, CPWM, CYBX, KIRK During: CRMT After: – 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.
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