Good morning! The market has been having a tough year so far. Although volume has picked up compared to last month, the indices have remained fairly volatile intraday with a lot of back and forth type of action. This is not surprising given the extended uptrend on the monthly charts and widespread resistance in many of the most popular stocks from the past year. It has made it a bit more difficult to get strong follow-through from one day into the next even on stocks which display strong momentum on one day, such as SAP, RSH, GD, LFC, and UCTT which were among the market leaders from Monday.
As on Monday, a number of individual stocks ignored the overall market and performed exceedingly well. These included STJ, WSM, RYI, VOL, AAPL, and CWTR. In the indices themselves, there was no significant preference towards the bulls nor the bears. The day began with some downside into the late afternoon support from Monday, as well as 5 minute 200 simple moving average support in the S&P 500 and Nasdaq. The 10:15 ET reversal period held well, however, and the indices popped back into highs. The resistance zone held and the market turned over with the 10:45 ET reversal period.
Given the momentum on the mid-morning rally, it took a bit of time for the market to turn back around very quickly. The momentum was still above average, but a small 2 minute Avalanche helped increase the downside momentum out of 11:00 ET. The initial decline at that point was the strongest on the Avalanche breakdown. As the Nasdaq came into morning lows and the S&P 500 and Dow came into prior lows on the 15 minute charts, then the pace began to slow and the indices began to favor a nice reversal into the early afternoon out of the 12:00 ET reversal period.
Apple Computer Inc. (AAPL) put a little bit of a halt to the reversal on the Nasdaq after unveiling its highly-anticipated iPhone. The Nasdaq flushed lower for a few minutes but then joined the other two indices in rounding off at lows. All three popped back into the 5 minute 20 sma which served as resistance. They then hugged that resistance level, forming a Phoenix as volume declined into 13:00 ET. The pace was strong as the moving average gave way and the reversal continued. The momentum from AAPL took that index back to its morning highs. The pace turned over a bit into the last couple of hours, but the indices held the earlier highs fairly well.
Despite a decent-size intraday range, the market ended the day not far from where it began. The Dow Jones Industrial Average ($DJI) fell 6.89 points (-0.1%). The S&P 500 ($SPX) fell by a similar amount, closing lower by 0.73 (-0.1%). The Nasdaq Composite ($COMPX) did manage to close higher, boosted by the tech sector with AAPL in the lead. It gained 5.63 points (+0.2%).
My bias is for this type of trading to continue as the week progresses. There is a slightly bullish bias, but it will be more difficult for the indices to really gain much upside momentum. As such, I am favoring the indices to move higher, but along support with a continuation of the high volatility we have seen thus far on the year.
Economic Reports and Events This Week
Monday: Consumer Credit for Nov. (3:00 pm)
Tuesday: -
Wednesday: Trade Balance for Nov. (8:30 am), Wholesale Inventories for Nov. (10:00 am), Crude Inventories 1/5 (10:30 am)
Thursday: Initial Claims 1/5 (8:30 am), Treasury Budget for Dec. (2:00 pm)
Friday: Export Prices ex-ag and Import Prices ex-oil for Dec. (8:30 am), Retail Sales for Dec. (8:30 am), Business Inventories for Nov. (10:00 am)
Key Earnings Announcements This Week
Monday: LIFC, NUHC, and SCHN.
Tuesday: EMMS, GAP, GBX, HELE, LWSN, SVU, VOL, AA, EXFO, OXM, RI, SNX, and WDFC.
Wednesday: ASHW, DNA, and SAPE.
Thursday: CRAI, INFY, MTB, MTG, SRR, CAMP, and IHS.
Friday: No earnings are scheduled
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance and Briefing.com. Occasionally changes will occur that are made after the posting of this column.
Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.
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