January 13, 2011
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Market Struggles to Hold December’s Gains (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.)
THURSDAY’S MARKET WRAP-UP
Market Snapshot for January 12, 2011 (10:43 p.m. ET): Closing Prices: DOW 12,471.02 (+21.57, +0.17%), SandP 500 1,295.50 (+3.02, +0.23%), NASDAQ 2,724.70 (+13.94, +0.51%), Nikkei 225 8,470.50 (+84.91, +1.01%), DAX 6,179.21 (+26.87, +0.44%), FTSE 5,662.42 (-8.40, -0.15%) OIL 99.57, GOLD 1,637.50, SILVER 29.80 EURO 1.2818, YEN 76.79, BRITISH POUND 1.5335, U.S. DOLLAR INDEX 81.08
Bears Start to Show Their Stuff The market has been difficult for swingtraders over the past several weeks, and often for daytraders as well. We did start to see better daytrade action once again on Thursday, but the market continued to hold the trading channel of the past several weeks. This has been marked by swings from highs to lows without a strong breakout bias. That, however, is starting to change. We’ve been following the market with two possible scenarios: One was the Momentum Reversal (TM) short on the daily charts. The other was a break in the channel on the upside to offer up another leg of buying similar to early December. For that to happen, however, we would have needed to have seen a strong hold on the upper end of the channel over the past day or so. That did not happen. The market has put in a stronger test of daily resistance with yet another slightly higher high and the continuation of overlap in price from one day to the next gave way to strong selling both Thursday and Friday morning.
As this momentum continues to shift on the 15 minute time frames, it solidifies the bear’s influence. I’ve marked the momentum shift on the daily charts to clarify. Even though the market recovered from Thursday morning’s rapid decline, the recovery was more gradual than the selloff, making it almost impossible to break Thursday’s premarket highs. It opened the door for another selloff, which followed a change in momentum on the 5 minute time frame afterhours and into the European open. Before long, the index futures were selling off and gaining momentum on that selloff as Friday’s opening bell approaches. It is also, however, running into support once again on the smaller time frames. This support comes in the form of prior lows and the lows of the daily channel of the past several weeks (corresponding to the 10-day moving average). The exhaustion move into the open will make it more difficult to sustain the selloff early in the regular session without slowing, but it will also limit upside as well. As we saw Thursday morning, stronger-than-average moves such as this have a more difficult time mounting recoveries of similar momentum. The exception is if the selloff is followed by slightly lower lows that shift the momentum before buying returns. Given the daily shift, however, that is unlikely to even be enough to change the outcome at this point and a pullback on the daily charts is likely with a break in the daily channel finally occurring. Nevertheless, the 5-15 minute exhaustion will make new setups unlikely on a 15 minute time frame and it will be lower risk to stick to 2-5 minute setups intraday and swingtrade shorts on the daily time frame.
INDEX WRAP-UP
The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a gain of 21.57 points, or 0.17%, and closed at 12,471.02. Twenty-two of the Dow’s thirty index components posted a gain. The strongest performers were Alcoa (AA) (+3.12%), Caterpillar (CAT) (+2.31%), and DuPont (DD) (+1.69%). The weakest were Chevron (CVX) (-2.60%), Bank of America (BAC) (-1.16%), and IBM (IBM) (-0.97%). The SandP 500 ($SPX) finished the session with a gain of 3.02 points, or 0.23%, and closed at 1,295.50. The top performing industry groups were the materials (+1.5%) and industrials (+0.9%). Losses were once again the largest in energy (-0.9%). The Nasdaq Composite ($COMPX) ended the session higher by 13.94 points, or 0.51%, on Thursday and it closed at 2,724.70. Nasdaq Composite (Figure 3)
ECONOMIC REPORTS AND EVENTS THIS WEEK
Jan 9 3:00 PM Consumer Credit Nov Jan 10 10:00 AM Wholesale Inventories Nov Jan 11 7:00 AM MBA Mortgage Purchase Index 01/07 Jan 11 10:30 AM Crude Inventories 01/07 Jan 11 2:00 PM Fed’s Beige Book Jan Jan 12 8:30 AM Initial Claims 01/07 Jan 12 8:30 AM Continuing Claims 12/31 Jan 12 8:30 AM Retail Sales Dec Jan 12 8:30 AM Retail Sales ex-auto Dec Jan 12 10:00 AM Business Inventories Nov Jan 12 2:00 PM Treasury Budget Dec Jan 13 8:30 AM Trade Balance Nov Jan 13 8:30 AM Export Prices ex-ag. Dec Jan 13 8:30 AM Import Prices ex-oil Dec Jan 13 9:55 AM Mich Sentiment Jan International: Eastern Time Zone (GMT -4:00) (New York, Toronto) Jan 12 JPY Eco Watchers Survey: Current (DEC) Jan 12 JPY Eco Watchers Survey: Outlook (DEC) Jan 12 01:00 JPY Machine Tool Orders (DEC P) Jan 12 02:00 EUR German Consumer Price Index (DEC F)*** Jan 12 02:00 EUR German Consumer Price Index – EU Harmonised (DEC F)*** Jan 12 04:30 GBP Industrial Production (NOV) Jan 12 04:30 GBP Manufacturing Production (NOV) Jan 12 05:00 EUR Euro-Zone Industrial Production w.d.a. (NOV) Jan 12 07:00 GBP BOE Asset Purchase Target (JAN)*** Jan 12 07:00 GBP Bank of England Rate Decision (JAN 12)*** Jan 12 07:45 EUR European Central Bank Rate Decision (JAN 12)*** Jan 12 08:30 USD Advance Retail Sales (DEC)*** Jan 12 08:30 USD Retail Sales Less Autos (DEC) Jan 12 08:30 USD Retail Sales Ex Auto and Gas (DEC) Jan 12 10:00 USD Business Inventories (NOV) Jan 12 10:00 GBP NIESR Gross Domestic Product Estimate (DEC)*** Jan 12 14:00 USD Monthly Budget Statement (DEC) Jan 12 23:00 JPY Bankruptcies (DEC) Jan 13 CNY Industrial Production YTD (DEC) Jan 13 CNY Fixed Assets Inv Excl. Rural YTD (DEC) Jan 13 CNY Real GDP YTD (4Q)*** Jan 13 CNY Retail Sales YTD (DEC) Jan 13 NZD REINZ House Sales (DEC) Jan 13 04:30 GBP Producer Price Index Input n.s.a. (DEC) Jan 13 04:30 GBP Producer Price Index Output n.s.a. (DEC) Jan 13 04:30 GBP Producer Price Index Output Core n.s.a. (DEC) Jan 13 05:00 EUR Euro-Zone Trade Balance s.a. (NOV) Jan 13 08:30 USD Trade Balance (NOV) Jan 13 09:55 USD U. of Michigan Confidence (JAN P)***
*** 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, Jan 9, 2012 Before: AYI, AUGT, PENX, ZEP During: – After: AA, MG, OCZ, SCHN, SMSC, VOXX, WDFC Tuesday, Jan 10, 2012 Before: – During: – After: RFMI, SNX Wednesday, Jan 11, 2012 Before: LEN, LEDS, SVU During: – After: NDN, DRWI, EXFO, PRXI Thursday, Jan 12, 2012 Before: INFY, SJR During: BKSC After: ESS Friday, Jan 13, 2012 Before: JPM During: – 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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