Dow Ends Week with Record Gains

Dow Ends Week with Record 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.)

Good day! As expected, volume was light on Friday. The stock market was closed for Thanksgiving on Thursday and was followed by a shortened session on Friday. The indices had been moving solidly higher into the holiday trading following a high volume pivot off lows the week before. The economic data has been quite dismal, but for now the market has priced in this news.

The day began on Friday with a gap lower into the open. The indices had rounded off in afterhours trade and had fallen ahead of the opening bell, but by the time it rang the indices were back at support on a 15 minute time frame. The Dow and S&P futures were both testing Thursday's lows, while the Nasdaq was hitting Wednesday's late afternoon lows. The market bounced immediately off these support levels out of the bell and the Dow and S&Ps easily closed their morning gaps. The Nasdaq, on the other hand, had a longer way to go. When the Dow and S&Ps hit resistance from their gap closure levels, the Nasdaq was testing resistance from a low the previous morning. This stalled the futures with the 9:45 ET correction period and the market fell back.

Nasdaq Composite ($COMPX)


The Dow did a very good job of holding up near the highs of the day as it corrected with a trading range. The weaker Nasdaq, however, moved in for a new low into 10:00 AM ET. The S&Ps found support at morning lows, falling into its own trading range, but the Nasdaq continued lower into the 11:00 ET correction period. This created a third low in that index, leading to a momentum reversal buy setup into mid-day. Meanwhile the Dow and S&Ps also began to set up buys. The momentum shifted on the 5 minute time frames with a gradual pullback from 11:00 to 11:30 AM ET. This created a 5 minute Phoenix pattern along the 5 minute 20 sma which led to a strong pop higher into noon. The buying continued throughout the rest of the session, led by the Dow.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) finished higher on Friday by 102.43 points, or 1.2%, at 8,829.04. Citigroup (C) led the gainers on Friday, up 17.59% to continue its bailout rally, while General Motors (GM) also posted gains once again on hopes of its own bailout. It closed higher by 8.94%. General Electric (GE) rose 6.05% on Friday, while Bank of America (BAC) rose 5.31%. 7 of the Dow's 30 components closed in negative territory, but the losses were minor. Home Depot (HD) posted the largest losses, down 1.87%, while WalMart (WMT) came in second with a loss of 1.43%. The index ended the month lower by 5.3%, but was up 9.2% in last week's shortened trading week. Over the past 5 trading days the Dow is up 1,277 points, or 17%. This is the largest 5-day point gain on record and the best 5-day percentage gain since 1932.

The S&P 500 ($SPX) rose 8.56 points, or 1.0%, and closed at 896 on Friday. The index ended the month lower by 7.4%, but was up 12% in last week's trade. The Nasdaq Composite ($COMPX) climbed 3.47 points, or 0.2% and closed at 1,535 on Friday. The index had a monthly loss of 10.8% in November, but a weekly gain last week of 11% despite its relative weakness on Friday compared to the other two indices.

S&P 500 ($SPX)


As we head into the new week of trade the indices are extended on the upside and thus favoring a correction intraday. Nevertheless, the larger bias on the daily charts remains bullish, so there is a good chance for a more gradual correction, leading to solid buying opportunities. Early November's highs will be the next main resistance for the indices, which are currently slowing at their 20 day simple moving averages. It would not take much, however, for them to be able to push past those levels into the 20 week simple moving averages. This would bring the Dow back into its 10k zone.

Market Rally Continues into the Holiday Despite Data Woes

Market Rally Continues into the Holiday Despite Data Woes

(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.)

Good day! The index futures opened lower on Wednesday following afterhours selling the day before, but had very little reaction to the negative premarket data on Wednesday. Ahead of the open, the Commerce Department reported that orders for U.S.- made durable goods fell 6.2% in October. This is the largest decline in two years and was substantially greater than the 2.5% decline that had been expected. Orders for transportation goods fell 11.1%. Excluding this, orders still fell by 4.4%. New orders for September were also revised lower from a 0.9% increase to a 0.2% decline.

In other news, consumer spending fell 1% in October. This was the largest decline in over 7 years. Nevertheless, the data was in line with expectations. When adjusted for inflation, real consumer spending fell 0.5%. Meanwhile, personal income rose 0.3% in October. On Tuesday the Federal Reserve had announced a plan to help boost lending by backing credit cards, auto loans, and other consumer and small business debt.

In one last bit of premarket news, the Labor Department reported early Wednesday that the four-week average of initial jobless claims had climbed to a 25-year high of 518,000, while continuing claims also hit 25-year highs of 3.92 million. Just last week President Bush signed an extension of jobless claims benefits by 7 weeks into law, with an extension of 13 weeks in states with unemployment rates topping 6%.

Nasdaq Composite ($COMPX)


The index futures held the lows made in the premarket at about 8:30 AM ET when these economic releases came out. The indices had formed a two-wave pullback on the 5 minute time frame which began at about 5:00 AM ET and it triggered a buy setup out of 8:30 AM. After a small pop, the market based into the opening bell. This congestion continued for about 15 minutes and then triggered an upside continuation out of the 9:45 AM ET correction period. This also triggered the gap closure setup which was in the direction of the larger 30 minute bias.

The market did react somewhat to the 10:00 AM ET new home sales data, but the reaction was brief. The Commerce Department had announced that new home sales fell 5.3% in October to the lowest level since 1991. On Tuesday it was reported that home prices were down a record 17.4% in October compared to just one year prior.

Volume was light on Wednesday as a result of the holiday season and this helped the new uptrend intraday hold on throughout the session. The indices congested mid-day after making their way into Tuesday's highs (and beyond in the Nasdaq), but then resumed their upward push into the close out of the 14:00 ET correction period. The session ended with a solid trend day for the fourth straight day of gains. This was the first 4-day rally since April for the Dow Jones Industrial Average ($DJI) and the first since May for the S&P 500 ($SPX) and Nasdaq Composite ($COMPX). In the Dow this rally amounted to the largest four-day rally on record, while it was the largest since the early 1930s in the S&Ps and Nasdaq.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) rose 247 points, or 2.9%, on Wednesday to close at 8,727. General Motors (GM) led the gainers with a whopping 35.1% rally. The stock was up even more at its highs into 13:00 ET on increasing confidence that the government is leaning towards a federal bailout. Citigroup Inc. (C) also posted strong gains of nearly 16% on the heels of the announcement that Mexican billionaire Carlos Slim's firm had invested approximately $150 million in the bank. AA, VZ, INTC, HD, and CAT also rose more than 5% on Wednesday. The shares of two companies, Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG) finished slightly lower on the day.

The S&P 500 ($SPX) rose 30 points, or 3.5%, and closed at 888. Energy, consumer discretionary, telecoms, materials, and technology led the index's gains. The Nasdaq Composite ($COMPX) climbed 67 points, or 4.6%, on Wednesday and ended the session at 1,532.

S&P 500 ($SPX)


Friday will be a shortened trading day in the markets with a close at 13:00 PM ET on the U.S. stock exchanges. The exchanges were closed on Thursday for Thanksgiving, so we should expect volume to continue to remain light into the weekend. I am expecting the most recent lows in the indices to now hold for a larger weekly correction off the support. As such, I am focusing primarily on buy setups for longer term daily and weekly holds and shying away from shorts other than on the smaller intraday time frames for the most part.

Economic Reports and Earnings Events for Dec. 1-5, 2008

Economic Reports and Events This Week

Monday, December 1, 2008
10:00a.m. Oct Construction Spending: Previous: -0.3%.
10:00a.m. Nov Mfg Index: Previous: 38.9.

Tuesday, December 2, 2008
12:00a.m. Auto and Truck Sales for Nov.
7:45a.m. ICSC Chain Store Sales Index For Nov 29: Previous: -0.9%.
8:55a.m. Redbook Retail Sales Index For Nov 29: Previous: -1.3%.
5:00p.m. ABC/Wash Post Consumer Conf For Nov 29: Previous: -52.

Wednesday, December 3, 2008
8:15a.m. ADP Employment for Nov.
8:30a.m. 3Q Productivity & Labor Costs, revised: Previous: +4.3%.
10:00a.m. Nov ISM Non-Mfg Index: Previous: 44.4.
12:00p.m. MBA Mortgage Application Survey for Nov 28: Previous: -2.1%.
2:00p.m. Federal Reserve Beige Book
3:35p.m. API Oil Industry Report for Nov 28
3:35p.m. US Energy Dept Oil Inventories for Nov 28

Thursday, December 4, 2008
8:30a.m. Initial Jobless Claims For Nov 29 Week: Previous: -14K.
10:00a.m. Factory Orders for Oct.
10:00a.m. DJ-BTMU Business Barometer For Oct 20: Previous: -0.6%.

Friday, December 5, 2008
8:30a.m. Nov Nonfarm Payrolls: Previous: -240K.
8:30a.m. Nov Average Workweek and Hourly Earnings
8:30a.m. Nov Unemployment Rate: Previous: 6.5%.
3:00p.m. Oct Consumer Credit: Previous: +$6.9B.


Key Earnings Announcements This Week:

Monday, December 1, 2008
Before: BE (?), NRGY
During: -
After: LTON, SNDA

Tuesday, December 2, 2008
Before: CMRT, BECN, BZH, LDR, SHLD, SOLF, SPLS
During: -
After: CPRT (?), MRCL, OVTI, SIGM

Wednesday, December 3, 2008
Before: DLM, POWL (?), SYNO
During: THO (?)
After: ARAY (?), ARO, CWST, CASY, PSS, CMTL (?), DMND, DDMX, GIL (?), ISLE (?), JAS, SNPS

Thursday, December 4, 2008
Before: STST, BRLI (?), BF.B (?), CMN (?), CUB (?), FLOW (?), GRB (?), JTX, KFY (?), LAYN, MOV (?), SAFM, SIRO, SFD, TOL, UTIW, WSM
During: -
After: CHP (?), CAE, GMTN (?), GIII (?), GES (?), HRLY (?), IPSU (?), LQDT, LAVA, NOVL, NX (?), SWHC (?), WIND

Friday, December 5, 2008
Before: BIG, BTH
During: -
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.

Market Rallies into Holiday Trade

(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.)

Good day! When I left for Vegas last week we were expecting a slow continuation of the downside that began early in November into new lows, followed by a sharp spike to the upside to break the channel. Well, the scenario played out quite well. The indices continued to move lower into Friday afternoon. At that point the indices rounded off at lows by creating slightly lower lows than the day before on high volume Thursday into Friday. Then the market gave us our sharp rally on Friday afternoon heading into the close.

The market has been quite fond of these rapid Friday afternoon reversals lately. We have seen it happen nearly every other week since the beginning of October. The rally continued into Monday morning with a gap higher and resumed into the closing bell. This broke the indices out of their downtrend channel as expected, but the market was not able to bust through the previous week's congestion. This price resistance zone held throughout trading on Tuesday with volume dropping off as the market corrected off highs.

Nasdaq Composite ($COMPX)


Even though the indices originally pulled back sharply off the highs on Tuesday into 11:00 am ET, the sharp upside momentum going into the week helped prevent a greater decay in price. Instead the pace began to shift mid-day with a slightly lower low into the 13:00 ET correction period and a continued rounding off at intraday lows at the zone of price support from mid-day congestion on Monday. At 4:30 ET the upside momentum increased when the indices busted through their 5 minute 20 period simple moving average resistance into the final hour of trade. They continued to hold up well into the close, leading to a positive close in the Dow Jones Industrial Average and S&P 500.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) rose 36.08 points, or 0.4%, on Tuesday to close at 8,479.47. Out of the Dow's 30 index components, 16 closed in positive territory. J.P. Morgan Chase & Co. (JPM) was among the gains, up 7.9%, while United Technologies Corp. (UTX) was on the losing side, down 4%.

The S&P 500 ($SPX) rose 5.58 points, or 0.7%, and closed at 857.39. Telecommunication services, financials, and materials led the gainers, while consumer staples led the decliners.

The Nasdaq Composite ($COMPX) shed 7.29 points, or 0.5%, and closed at 1,464.73. The index was weighed down by technology shares such as Cisco Systems Inc. (CSCO), which fell 6%, while Hewlett-Packard Co. (HPQ) fell 5.9%.

S&P 500 ($SPX)


Right now the market is looking quite similar on a daily time frame as what we have seen over the course of many of these recent Fridays. The indices have established a third lows, slightly under the prior two. This has created a rounded appearance. The technical bias as a result is a positive one. In fact, there is a decent likelihood that the market can experience a sharp recovery. The zone of congestion from early November highs is the next main daily resistance level.

Market Continues to Show Weakness Despite Sharp Mid-Week Rally

Market Continues to Show Weakness Despite Sharp Mid-Week Rally

(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.)

Good day! The market extended Friday's afternoon losses into the morning on Monday. Another it had little impact on premarket action, the Federal Reserve reported that industrial production increased somewhat in October. September's decline was revised from -2.8% to -3.7%, but it rose 1.3% this past month. Factors such as hurricane action in the Gulf and a strike at Boeing were cited as the major cause for September's massive decline, but few will disagree that we are currently seeing more and more proof of a global market recession, whose impact extends to the manufacturing sector as well. One of the major news events was the loss of 50,000 jobs by Citigroup, Inc. (C).

Nasdaq Composite ($COMPX)


The opening continuation action in the form of a gap lower left the index futures at price support into Monday's open from congestive action during the middle of the past week. The market reacted to the support with a closure of the Nasdaq's gap zone, but the pace of the downside made it very difficult for the market to attempt any larger price correction off the lows. Instead, the indices went the typical route following a larger-than-average move and fell into more of a congestive correction with only moderate upside intraday.

The morning lows hit in the indices at about 10:15 am ET. This was followed by a small Phoenix pattern on a 2 minute time frame. The Phoenix triggered coming out of the 11:00 ET correction period and took the indices higher into 11:15 ET. A second base formed along the 5 minute 20 sma. This latest range broke on the upside at about 11:45 ET. All three of the major indices used this action to completely close the morning gaps before the pace shifted over noon.

The 15 minute 20 period simple moving averages intraday held as strong resistance on the mid-day rally and the market slowed into them. By rolling over into 13:00 ET the market was able to eventually create a larger 15 minute base along lows for a reverse cup with handle pattern or Avalanche. This triggered shortly before the close at about 15:30 ET and the setups continued to follow through in afterhours trade.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) fell 223.73 points, or 2.6%%, on Monday to close at 8,273.58. Out of the Dow's 30 index components, 27 closed in negative territory. The losers were led by Alcoa Inc. (AA), which fell 10.79 points. Bank of America (BAC) was the second largest loser in the Dow, falling 8.47%. Another financial firm, Citigroup (C), came in third with a loss of 6.62%. Despite trading well under $5 a share since earlier this month, General Motors (GM) led the advancers with a gain of 5.65%. At $3.18 a share at the close, however, this is hardy enough to stir favorable sentiment. General Electric (GE) and Boeing Co. (BA) also posted gains, but only by a fraction of a percentage point.

The S&P 500 ($SPX) lost 22.54 points, or 2.6%, and closed at 850.75. All 10 of the S&P's industry groups closer lower on the day. Leading the decline were financials, consumer discretionary, and materials. On the retail front, the second largest U.S. discount retailer, Target Corp. (TGT), fell 4.1% on Monday after it reported a fiscal third-quarter profit decline of 24%. It also cut its spending outlook for 2009 and decided to temporarily suspend its share repurchase plan. Net quarterly income for the past fiscal quarter ending Nov. 1 fell 49 cents a share from 56 cents a share one year ago, while total revenue increased 1.9%.

The Nasdaq Composite ($COMPX) dropped 34.80 points, or 2.3%, and closed at 1,482.05.

Crude oilfutures also continued to slip lower on Monday, down $2.09 a barrel to close at $54.95 a barrel for December delivery on the New York Mercantile Exchange. If you do not have access to futures charts intraday, you can also track its progress by following USO.

Although not nearly as bad as on Friday, decliners still outpaced advancers on Monday by 2 to 1 on the New York Stock Exchange and about 3 to 2 on the Nasdaq on modest volume.

S&P 500 ($SPX)


Due to Monday's closing price action, I am favoring further downside into Tuesday morning. Volume was steady throughout the congestion on Monday, indicative of a continuation pattern forming. Support will hit in the zone of the prior lows on a 15 minute time frame. This will also be approximately and equal move level on a 15 minute time frame when comparing the drop off Friday's afternoon highs into Monday's morning lows to the likely break lower into Tuesday morning.

Should the indices chop lower through this third test of lows on the daily time frame, it will open the door for a sharp and seemingly unexpected pop higher very quickly with a channel break of that slower downside channel. In order to prevent this, it would be better for the indices to bounce here and than attempt to break the lows in another week or two. I think that given the pace of the downside on the 120 minute charts, however, that the former is more likely than the latter.



I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net/.

Fibonacci Webinar Info - Recording and Power Point

Hey gang! Here is the info for last week's ISE presentation for those that were not able to attend:

Here is the link to Tuesday's power point on utilizing
Fibonacci levels in the forex markets:
http://www.tradingfrommainstreet.com/presentations/ISE_Fibonacci20081111.ppt

Here is also the link for the recording of Tuesday's session:

https://ise.webex.com/ise/lsr.php?AT=pb&SP=EC&rID=28487212&rKey=2EF31B9DCFE4CA20

If you enjoyed this presentation, I would like to encourage you to also
check out my site www.swingtrader.net. There you will find information on my in depth course covering the tools I use to analyze the markets, including a segment on Fibonacci.

If you have any questions at all, please feel free to drop me a msg!

All my best,
Toni Hansen
http://www.tradingfrommainstreet.com

Virtual Accounts and Making the Transition from Stocks to Futures

From email: “I just watched your webinar "Choosing the Right Strategies and it was very informative, especially the 'placement of stops'. I plan on using a Virtual trading account at to get some trading experience in trading the E mini S&P, as you mentioned in the webinar.”

Excerpt from my reply: “Using the virtual account is definitely a great way to get started! If you already have a stock trading account also consider taking smaller positions in the ETFs trading them based upon the futures charts. For instance, 800 shares of the QQQQ is equal to one contract in the NQ, while 500 shares of the SPY is 1 contract in the ES. You can trade 400 shares of the QQQQ or 200 of the SPY to get a feel for trading the futures moves without the risk of doing so when you start to make the transition from simulated trading to live executions…”

Toni Hansen
http://www.swingtrader.net

Market Faces Corrective Action Following Thursday's Late-Day Surge

Market Faces Corrective Action Following Thursday's Late-Day Surge

(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.)

Good day! The market surged sharply on Thursday with an intraday range of over 900 points in the Dow Jones Industrial Average that had taken it back into October's lows before sharply reversing higher into the close. The indices had struck strong resistance levels into the closing bell with three waves of buying in place and the 15 minute 200 period simple moving averages hitting intraday. This helped turn the index futures lower in afterhours trade. As I mentioned in yesterday's column, the gradual decline compared to the rally created the possibility of a 2T on the all sessions time frames. This would have meant a very slightly higher high that would serve as a trap before the downside pace increased. When I published yesterday's column, however, the indices were not yet forming this potential trap and the market continued to favor a more gradual erosion in prices.

In the end the two possibilities were were looking at combined. The index futures did attempt to head back into highs at 3:00 am ET, but they failed to penetrate the upper level price resistance. Nevertheless, this attempt alone was enough to help shift the pace of the selling as compared to that which had been in place heading into midnight and the market gained momentum on the downside on Friday morning.

Adding to the weakness on Friday was premarket data from the Commerce Department which estimated that U.S. retail sales fell by a record 2.8% in October. This was worse than the expected 2.3% decline, which in and of itself was rather dismal. Auto sales fell 5.5%, but even excluding these numbers, retail sales dropped 2.2%, remaining in record territory. The last time retail sales had fallen for four straight months was in 1974.

Nasdaq Composite ($COMPX)


There was a brief attempt at a recovery out of the bell, but by 10:00 ET the selling had resumed and the market continued lower into noon. Since the indices failed to form a true trap in the premarket action, the overall selling was still more gradual than the prior day's rally and when the market came into price support from the 15:00 bull flag on the 5 minute on Thursday it was strong enough to roll the indices over at the lows. This support zone was also the 38.2% to 50% retracement levels in the index futures and price support from prior 15 minute highs earlier in the week, so this created additional incentives for an upside correction heading into the 12:00 ET correction period.

On the Nasdaq, three distinct lows formed on the 5 minute time frame with each low breaking the previous one on downside chop following a sharper descent out of 10:00 am ET. This created the basis for a mid-day momentum reversal pattern which triggered shortly after noon when the upper end of the late-morning channel broke to the upside. This resulted in an upside bias throughout the majority of the afternoon.

Even though the Dow first hit its 15 minute 200 sma and the S&Ps followed soon thereafter, it was the Nasdaq's 15 minute 200 sma that I focused on as the main target for a larger resistance level and reversal into the final hour of trade (as posted in my live trading room). The reason is that this added time allowed the Nasdaq to form three highs on a 200 tick chart that would help shift momentum again. It held perfectly with the 15:00 ET correction period and the indices fell sharply, giving back all of their late-day gains to put them firmly back into negative territory for the day.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) closed lower on Friday by 337.94 points, or 3.8%, at 8,630.32. On the week as a whole the Dow is down 3.5%. Intel Corp. (INTC) led the losses on Friday, down 7.69%, while Home Depot (HD) fell 7.60%, and J.P. Morgan Chase (JPM) fell 7.31%. Out of the Dow's 30 components, only General Motors (GM) and Citigroup Inc. (C) posted gains on Friday. GM rose 2%, while C rose less than 1%.

The S&P 500 ($SPX) fell 38.00 points, or 4.2%, and closed at 889.41. This week's losses in the S&P 500 came to -6.2%. On Friday the losses were led by consumer discretionary, financials, and energy. Crude oil prices fell 7% on the week. Oil futures closed at $57.04 a barrel, down $1.2 from Thursday's close.

The Nasdaq Composite ($COMPX) shed 79.85 points, or 5.0%, and closed at 1,547.14. The Nasdaq lost more than the other three indices for the week as a whole, down 7.9%. On Friday decliners outpaced advancers on the NASDAQ and New York Stock Exchange by approximately 4 to 1.

S&P 500 ($SPX)


The market is still at risk of an attempt to push slightly lower by the end of the year, although the third test of lows created the holding pattern we had been expecting into the weekend. The lows from 2002, however, are quite close and can still act as a magnet. The best pattern at this zone of support that would lead to a stronger bounce into next year would be a decent pull off this third low into about the 50 day simple moving average, followed by another strong breakdown into the larger monthly support from 2002 in the S&Ps and Dow. This would then form a 2B on the weekly time frame. This retest will often come in the form of two waves of selling.

Key Earnings Announcements for Nov. 17-21

Monday, November 17, 2008
Before: COV, DHT (?), LOW, NSSC, ORBK, RTLX, TGT
During: -
After: CNTF, CTRP, IMCL (?), JMBA, KONG, SGK, NCTY, XFML

Tuesday, November 18, 2008
Before: ARM, CMED,GIGM, HD, MWRK, SOL, SKS
During: -
After: DY (?), JBX, LZB, PSUN, PVH

Wednesday, November 19, 2008
Before: BJ, EV (?), LDK, MENT, ROST, TSL, TWB
During: -
After: CYBX, DBRN, EGLT (?), GYMB, HOTT, INTU, LTD, LDG (?), MW, PETM, PLNR, SMTC, TK (?), WGOV

Thursday, November 20, 2008
Before: AGYS, STST (?), BKS, BONT, BRC, CTR, PLCE, DKS, EJ, FRE (?), GME, GCO (?), GRB (?), GSIG (?), HP, ITWO (?), IDEV (?), IUSA (?), LTXX (?), LULU (?), MPR, NWY, PTRY, PSCO, PPC (?), SBH, SCHS, SCBL, SSI, SMRT, STP, SCMR, BKE, TDG, WTSLA, YGE (?)
During: -
After: ARAY (?), ARUN, ADSK, BRCD (?), JRJC (?), CHRD, CPWM, DELL, DDS (?), DITC, FL, GPS, HIBB, HRAY, JCG (?), CRM, ZUMZ

Friday, November 21, 2008
Before: ANN, CSIQ, HNZ, SJM, KIRK
During: -
After: ANSV (?)

Economic Reports and Events for Nov. 17-21

Monday, November 17, 2008
8:30a.m. Nov NY Fed Manufacturing Index: Previous: -24.6.
9:15a.m. Sep Industrial Production: Previous: -2.8%.
9:15a.m. Sep Capacity Utilization: Previous: 76.4%.

Tuesday, November 18, 2008
7:45a.m. ICSC Chain Store Sales Index For Nov 15: Previous: -1.0%.
8:30a.m. Oct Producer Price Index: Previous: -0.4%.
8:30a.m. Oct PPI, Ex-Food & Energy: Previous: +0.4%.
8:55a.m. Redbook Retail Sales Index For Nov 15: Previous: -1.2%.
9:00a.m. Sep Treasury International Capital Flows: Previous: $900M.
1:00p.m. Nov NAHB Housing Market Index: Previous: 14.
5:00p.m. ABC/Wash Post Consumer Conf For Nov 15 Previous: -50.

Wednesday, November 19, 2008
8:30a.m. Sep Consumer Price Index: Previous: 0%.
8:30a.m. Sep CPI, Ex-Food & Energy: Previous: +0.1%.
8:30a.m. Sep Housing Starts: Previous: -6.3%.
10:35a.m. Nov 14 US Energy Dept Oil Inventories
11:00a.m. Nov 14 API Oil Industry Report
2:00p.m. Oct FOMC Minutes

Thursday, November 20, 2008
8:30a.m. Initial Jobless Claims For Nov 18 Week: Previous: +32K.
10:00a.m. Oct Conference Board Leading Indicators: Previous: -0.3%
10:00a.m. Nov Philadelphia Fed Business Index: Previous: -37.5.
10:00a.m. DJ-BTMU Business Barometer For Nov 8: Previous: -0.7%.

Friday, November 21, 2008
No economic events are scheduled for today.

Market Snaps Back After Testing the Year's Lows

ood day! After closing at the day's lows on Wednesday, the index futures traded in a range throughout afterhours trade. They bounced back and forth well into mid-day trade on Thursday. Ahead of the open the Labor Department announced that filings for jobless benefits rose yet again last week to 516,000. This is the highest levels since September 2001. The four-week average hit its highest level since March of 1991 at 3.89 million. In other news, imports dropped a record 5.6% in September while exports fell 6%. This further points towards the recession which is now underway with trade declining across the board.

Nasdaq Composite ($COMPX)


The market actually bounced a bit following the sour data, which was at least met with relief that it had not been worse than expected. The bounce was only enough to establish an equal move on the 5 minute time frame though, and not enough to break the larger range along the lows that had been in place since just after the previous day's close. Following the opening bell, the indices continued to range along lows with the 15 minute 20 period simple moving average holding as the upside intraday resistance.

The indices did not try any slightly lower lows during the afterhours and premarket congestion, so this prevented the index futures from rounding off at the lows and reversing course into the morning. The result was a continuation of the bearish bias that had been in play throughout past several days. The range finally gave way to that bias shortly after noon. The selling continued until the indices touched down at the zone of the previous day's lows.

This third test of lows led to some slightly lower lows for a second time on the daily charts in the Nasdaq 100 and S&P 500 futures. The pace was not strong enough, however, to allow them to break at this time. Since the downside momentum into the lows was about the same as the previous rally off them into the upper end of the daily trading range the market held the lows which hit at the same time as the 13:00 ET correction period.

Dow Jones Industrial Average ($DJI)


Once the rally was underway, it gained momentum very quickly. The indices broke through their 5 minute 20 period simple moving averages after only forming a 3-bar continuation pattern. This break soon took the indices back into the morning's opening price zone at the 14:00 ET correction period. A very minor correction off this resistance was followed by another strong continuation which broke the indices through the 5 minute 200 sma and 15 minute 20 sma with very little hesitation at all.

This second move higher continued into the previous afternoon's mid-day highs. This resistance zone was also the 5 minute equal move zone in the Nasdaq. A second correction lasted a bit longer than the first, pulling into the 5 minute 20 sma support at about 15:00 ET. A third and final intraday move followed in the final hour of trade, taking the indices to their 15 minute 200 sma resistance levels into the closing bell. This was also the zone of Tuesday's highs, providing a double dose of resistance at the end of the day which prevented the index futures from continuing the rally for the remainder of trade afterhours on Thursday.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed higher on Thursday by 552.59 points, or 6.7%, at 8,835.25 after trading in a range of over 900 points intraday. The gains were led by Chevron Corp. (CVX), which rose 12.53%. Caterpillar Inc. (CAT) rose 12.34%, while Home Depot (HD) climbed 12.27%, and Alcoa Inc. (AA) rose 10.13%. On the losing end were General Motors Corp. (GM), down 4.22%, and Citigroup Inc. (C), which fell 1.97%.

The S&P 500 ($SPX) rose 58.99 points, or 6.9%, and closed at 911.29 with energy, financials, and materials leading the gains which extended to all 10 of the S&P's industry groups. The Nasdaq Composite ($COMPX) rose 97.49 points, or 6.5%, and closed at 1,596.7. Crude oil hit a new low on the year of $54.67 a barrel, but reversed mid-day with the rest of the market and closed at $58.24 a barrel, up $2.08, or 3.7%.

I am expecting a more choppy session in Friday's trade as a result of the strong extension on the 15 minute time frame Thursday afternoon. I suspect that the week's lows will continue to hold into the weekend, but the market is favoring more of a correction off the afternoon highs into Friday. The potential is there for a 2T with a slightly higher high fiven the current momentum action. This would allow for a stronger move lower intraday on Friday, but as of 2:00 am ET the bias is more in favor of a more gradual erosion.

Monday's Breakdown Continues

Monday's Breakdown Continues

(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.)

Good day! In yesterday's column I discussed several scenarios for trade on Wednesday's session based upon the day's opening momentum. The third scenario was built upon the advent of an increase in downside momentum into Wednesday's open that would lead to a continuation lower until the market was able to establish an equal move support level based upon a comparison to the move lower from the 4th to the 6th with the current descent off the highs of the 10th of November. By once again gapping sharply lower on Wednesday morning, it set up the pace that was necessary for this larger continuation move.

Nasdaq Composite ($COMPX)


As you may recall in the previous two columns, when faced with a larger-than-average gap in the indices themselves, my primary strategy is to bracket the 15 minute highs and lows and then take a trigger based upon whichever one broke first. Of course this is done by keeping in mind that larger-than-average gaps in the indices have a greater tendency towards closure than in individual stocks. When the market, however, is triggering a larger pattern with the gap itself, the risk is higher to go against that larger pattern.

In this case, we knew heading into the session that should momentum increase on the downside in the morning, then the odds favored a continuation lower for that larger equal move target. Nevertheless, using simply the intraday action and ignoring the larger bias would have led you to a false trigger on the upside based upon the strategy of a 15 minute bracket breakout. While the previous two gaps also had the 30 minute time frames in favor of the direction their 15 minute brackets broke, on Wednesday this was not the case and would have caused folks to stop out just using the intraday action alone.

Dow Jones Industrial Average ($DJI)


Although the indices broke 15 minute highs on Wednesday, the initial opening action was weak. This meant that the upside at 9:45 ET was just enough to help form a longer trading range before the indices were once again able to pick up on the larger downside bias with a 2-wave short continuation pattern on the 2 minute charts triggering with the 10:15 ET correction period.

With the downside bias now firmly under way, the market made very little attempt to break its trend. Even though the indices congested mid-day, the selling took over once again out of the 13:00 ET correction period. At that point the indices had hit 15 minute 20 period simple moving average resistance. This held, along with the correction period, and the market pushed to new intraday lows in the afternoon, eventually giving up more than 400 points in the Dow. The market selling lasted into the closing bell.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed down 410 points, or 4.7%, on Wednesday at 8,284. 29 of the Dow's 30 components again posted losses on the day. Ironically, General Motors was the only one to post gains after it had been the downside leader at the start of the week. Best Buy (BBY) and Macy's (M) both reported negative news on the consumer spending front and this is likely to weigh heavily on the week with many retailers reporting earnings this week.

The S&P 500 ($SPX) fell 47 points or 5.2% on Wednesday and closed at 852. Financials, energy, and consumer discretionary shares led the downside. The Nasdaq Composite ($COMPX) fell 82 points, or 5.2%, and closed at 1,499 for its lowest close of the year. Since election day, the Dow has fallen 14%, while the S&P 500 is down 15.3%, and the Nasdaq has fallen 15.8%.

Since the indices have now established those 30 minute equal moves and are hitting price support at October lows, we do have the potential to see a reaction off this support zone as we wrap up the week. I am not currently, however, seeing any strong buy signal, although a mere channel break on a 15 minute time frame off the support level can be enough. Ideally rounded lows will help with larger price corrections. Since this is the third test of lows on the daily time frame there is the added risk that the market will try to break to new lows since the third test of support or resistance levels is the most likely time that it will break.

Market Continues to Suffer Loss of Confidence

(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.)

NOTE to those that attended Saturday's session: Tuesday's market action in the indices was the exact same template in reverse that I we discussed with momentum reversals intraday. You can review this online now under the "Intraday Action" segments of the class and I will show this action in more detail in this week's follow-up video.

Good day! The market opened sharply lower on Tuesday morning, breaking very quickly through the previous day's lows with the gap lower. This negated the potential reversal patterns I had been looking for the evening before by increasing the downside momentum on the 5 and 15 minute time frames. The same strategy for dealing with the morning gap applied as on Monday, by marking the 15 minute highs and lows, a break triggers the direction the market will most likely trend throughout the morning. In this case the lows broke at that point, triggering continued selling intraday.

Nasdaq Composite ($COMPX)


With a large move already in play, the momentum did not continue as strongly as the morning wore on. The indices began to come into support as they hit equal move levels as compared to Monday's morning selloff. Very small bear flags helped shift the momentum as well by breaking lower without enough time to correction to the previous downside action. This created rounded lows in the form of what I call a Momentum Reversal pattern. This consists of a series of three lows where each new low breaks the prior one only slightly. This happens after a larger downside move had already been established. By only breaking the lows slightly with two sets of 2B patterns on the 5 minute time frame, the market was able to shift its bias into the afternoon.

Dow Jones Industrial Average ($DJI)


A nice Phoenix pattern formed between 13:30 and 13:45 ET, triggering a sharp mid-afternoon recovery into 14:30 ET. This move brought the indices back into the zones of closing the morning gaps and were accompanied by moving average resistance at those levels as well with the 5 minute 200 period simple moving averages hitting at about the same time. Although the market had a very technical reason for its sharp afternoon surge, it received a boost from news of government and lender plans to help those suffering under their current mortgage plans by assisting in the refinancing of their loans.

When the gap closed and moving average resistance hit, however, the market again reversed course. It pulled back sharply into 5 minute 20 sma support and was then following by a 5 minute Avalanche when it hugged the support level before breaking lower once again into 15:00 ET. Even though the indices recovered off the support from the mid-afternoon Phoenix congestion, all three of the major indices still reported what would typically be considered sizable losses.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed lower by 176.58 points, or 2.0%, on Tuesday at 8,693.96. 29 of the Dow's 30 components posted losses on the day. After breaking lower on Thursday from a multi-week range at lows, General Motors Corp. (GM) fell another 13.1% in Tuesday's trade and ended the session at $2.92 a share. Alcoa Inc. (AA) also did not hold up well despite Monday's gains. It fell back 6.8% following a downgrade.

The S&P 500 ($SPX) also ended the day lower, down 20.26 points, or 2.2%, to close at 898.96. All 10 of the S&Ps industry sectors felt losses on Tuesday, but those that were the hardest hit included telecommunication services, financials and energy. Crude oil closed under $60 a barrel for the first time in 20 months and shares in companies that track alongside crude were not happy by this revelation. The Nasdaq Composite ($COMPX) also fell 2.2%. This amounted to a 35.84 point decline. The index closed at 1,580.9.

Currently the market is now favoring a 2B on the 60 minute time frame. The Nasdaq is the weakest of the three indices and broke a bit too low for a decent 2B, but both the S&Ps and Dow have only slightly lower lows on this time frame. I do feel that the break to a 2B was a bit on the early side, so there is still the risk for the same type of pattern we saw form on the 5 minute time frames on Tuesday morning. This would mean the potential for a third low on the larger time frames intraday. If the market gains momentum into a third low compared to into the second, however, then it will be akin to what we were watching on the 15 minute charts into Tuesday where it would trigger a second, larger breakdown where an equal move from the highs of the 4th to the lows of the 5th would serve as support with the highs of the 10th as the beginning of the second larger momentum decline. These are the main patterns that are under development, but we will have to monitor price action off Tuesday's lows in order to make a more accurate prediction on which of these it will end up shifting more towards. I am not suspecting any immediate attempt to break prior daily lows, however, and would urge caution on holding bearish positions overnight.

Market Erodes Early Morning Gains

Market Erodes Early Morning 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.)

Good day! The Dow Jones Industrial Average ($DJI) opened higher on Monday by approximately 200 points on the heels of the announcement of a $586 billion economic stimulus package in China. As the fourth-largest economy in the world, it has also begun to feel the impact of this year's global economic slowdown and has started to take steps to attempt to alleviate its affects.

On Friday the market had flushed lower in the afternoon, failing to confirm an initial attempt at a trigger on a 15 minute cup-with-handle pattern, but the larger 30 minute momentum shift off Thursday's lows would not give up that easily. The cup-with-handle pattern tried a second time around heading into Friday's closing bell and continued to move higher in immediate afterhours trade and into Sunday evening with the index futures trading sharply higher by the time Monday morning's opening bell rang as the technical pattern receiving a huge boost from the weekend's news.

After hitting highs at about 19:30 ET on Sunday evening, the futures began to gradually pull back, but held close to the highs. This created a bull flag, but due to the already exhausted upside from the earlier surge it was still too early to sustain any comparable continuation move. The result was a push to a second high, but the slower upside compared to the previous rally left it with only a slightly higher high. This resulted in a type of double top where a second slightly higher high creates a trap. I call this pattern a 2T and it often leads to sharp price reversals, particularly when momentum and volume slow into the second high as compared to the move into the first.

Nasdaq Composite ($COMPX)


The indices futures began to turn around at the second premarket high between 5:15 and 6:45 am ET. They gained momentum on the reversal between 6:45 and 7:30 am ET. This returned the index futures to the price zone of the breakout heading into that second high. This early morning congestion served a a strong support zone and a pattern I call an Avalanche began to form by basing along this support zone.

The Avalanche short setup triggered at 9:00 am ET and the sharp selling that had kicked off around 6:45 ET resumed. It gained momentum into the opening bell, but still managed to allow the indices to open with a much larger-than-average upside gap. In the 5+ hour seminar I taught on Saturday we looked at one of my favorite strategies for trading these extreme market gaps.

Most of the extreme gaps in the indices themselves will fill on the day of the gap unless they are a breakaway gap on the daily time frame. In the case of Monday's gap, the premarket action and the gap itself merely took the indices into the 15 minute target of the cup-with-handle which had formed on Thursday and into Friday afternoon. Additionally, both the S&P 500 and Dow Jones Ind. Ave. opened with the 15 minute 200 period simple moving average intraday directly overhead to serve as a secondary resistance zone. This meant that the technical bias for the market was already in favor of a correction off highs.

Dow Jones Industrial Average ($DJI)


By breaking through the lows of the first 15 minutes of the day, the market assured that it would be attempting to close the morning gap in at least one of the three major indices. The Nasdaq Composite was the weakest and it came into its gap closure zone as early as 10:05 am ET when it also found support at the 5 minute 200 period simple moving average. The larger upside exhaustion, however, favored a continuation of the selling into noon and the market pivoted off highs around 10:30 ET, breaking to new lows at 10:45 ET.

A series of small bear flags continued to help the market slide lower into the early afternoon. By then all three of the indices had taken back all of their opening gains and were facing mounting losses for the day. Both the S&Ps and Dow again found support from Friday's congestion, while the weaker Nasdaq made its way into support from Friday's intraday lows.

The market found initial support on the 15 minute time frame from these levels on Friday at the same time as the 13:00 ET correction period hit. This, along with the 14:00 ET correction period, are my two favorite ones to monitor for larger intraday corrections. In this case the three indices were each able to push higher for about an hour into the resistance zone of their 15 minute 20 period simple moving averages. The Nasdaq formed a 5 minute Phoenix which also took it into its 5 minute 200 sma as resistance. This had been the initial morning support. The S&Ps and Dow, however, formed three small waves of upside into their resistance zones. This created an extended trend on a 2 minute time frame. These resistance levels and trend completion moves combined with the 14:00 ET correction period to yield another break to lows heading into 15:00 ET.

S&P 500 ($SPX)


Since the market had moved higher into 14:00 ET about as quickly as it had fallen into the early afternoon lows, this made it difficult for it to strongly break that zone. It had not bounced quite enough to be able to hold the exact lows, so it went for a 5 minute equal move as compared to the last drop into 13:00 ET. This hit with the 15:00 ET correction period, which also was accompanied by strong price support at last Thursday's lows in the Nasdaq.

As you can see, by working together, the support and resistance levels, along with the afternoon correction periods, served as strong catalysts for the afternoon pivots on both the 5 and 15 minute time frames. The last test at 15:00 ET created a 2B on the 5 minute time frame. This is the exact opposite pattern as the 15 minute 2T that had formed in premarket trade and the market was able to hold the zone of the 15:00 ET low into the closing bell.



The Dow Jones Industrial Average ($DJI) closed with a loss of 73.27 points, or 0.8%, on Monday at 8,870.54. After breaking lower on Thursday from a multi-week range at lows, General Motors Corp. (GM) was again the hardest of the Dow's 30 index components. It fell another 22.94% in Monday's trade and ended the session at a new low for the year of $3.29 a share. 20 of the Dow's 30 components closed in the red on Monday, but compared to GM's losses, the next runner up, Disney Corp. (DIS) with a loss of 5.48%, was no comparison. American Express (AXP), Citigroup (C), Bank of America (BAC) completed the line-up at the lows. Each fell approximately 5% on the day. On the opposite end of the spectrum, Alcoa Inc. (AA) posted a gain of 5.27%, which the second runner-up was McDonald's (MCD) with a gain of 1.82%. The telecoms then followed with AT&T (T) up 1.74% and Verizon (VZ) up 1.46. Walmart (WMT) was in fifth place with a higher close of 1.45%.

The S&P 500 ($SPX) also ended the day lower, down 11.78 points, or 1.3%, to close at 919.21. As we saw in the Dow, financials, consumer discretionary, and utilities fronted the losses. Energy was the only one of the 10 S&P industry groups to post gains. Leaders included Peabody Energy Corp. (BTU), which rose 8.3%, and Nabors Industries Ltd. (NBR), which climbed 6.2%. The Nasdaq Composite ($COMPX) fell 30.66 points, or 1.9%. It settled at a closing price of 1,616.74.

The action in Monday's session leave the market open for a move either direction on Tuesday morning. It may break higher to hold the 2B on the 5 minute time frame and create a larger two-wave correction on a 60 minute chart, but any weakness right away can still bring in a third low on that 5 minute chart before allowing a momentum reversal to take place. This would also be a bullish pattern. The odds are less favorable for any strong breakdown based upon these time frames, so I would urge added caution on any larger intraday holds on the short side unless the momentum once again shifts on a 15 minute time frame.

MASTERING MOMENTUM GAPS

MASTERING MOMENTUM GAPS

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Market Gains Ground Despite Indecisive Trade

(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.)

Good day! Market action was rather slow heading into the weekend with many traders moving to the sidelines following early morning upside. The market remains extended on the weekly time frames and I'm starting to hear rumblings of bigger names beginning to position themselves slowly back into the market, although I must admit to being one of the more cautious players at this time. Despite the strong momentum move lower on Wednesday and Thursday, the market began to round off at lows in Thursday's trades, helping it hang onto those lows throughout the session on Friday.

The Dow Jones Industrial Average ($DJI) closed with a gain on Friday of 248.02 points, or 2,9%, at 8,943.89. This trimmed the losses on the week to -4.1%. Alcoa In. (AA) posted the strongest gains in the index, up 9.1%. General Motors (GM), on the other hand, posted nearly mirror losses, down 9.2% after it reported a third quarter loss of $2.54 billion... ouch...

The S&P 500 ($SPX) gained 26.11 points, or 2.9%, to close at 930.75. Friday's gains helped cut its losses on the week down to -3.9%. Utilities, energy, and health care led the upside in the S&Ps, but all 10 of the index's industry groups closed on the upside.

The Nasdaq Composite ($COMPX) rose 38.7 points, or 2.4%, and ended the session on Friday at 1,647.4. This brought its weekly loss to 4.3%.

Nasdaq Composite ($COMPX)


On Friday the Labor Department reported that the U.S. unemployment rate rose 0.4% in October to 6.5%. This was worse than had been expected, but the market was still able to gap higher into the open coming out of the momentum shift on the 15 minute time frame from the previous session. The indices did react to resistance right away into the opening bell, however, and began to pull back into the gap right away. This continued into the 9:45 ET correction period. At that time the 5 minute 20 period simple moving averages also hit and the support level held, reversing the market once again in favor of the larger 15 minute momentum shift to the upside.

Dow Jones Industrial Average ($DJI)


The morning rally continued into the 10:45 ET correction period. At this point the NQ (Nasdaq 100 Emini) had returned to Thursday's opening price level. This level, coupled with the correction period and the 5 minute extension intraday helped slow the pace of the buying and led to a correction off the intraday highs into the second half of the morning. Although the 5 minute 20 sma once again acted as support on this second pullback of the day, the support zone only held for about 15 minute before a second wave of selling hit on a 1 minute time frame and dropped the market through this support. The momentum on the pullback was comparable to the previous upside move and this allowed it to more easily create a larger price correction. Nevertheless, prices again stabilized into noon with the session's opening price zone serving as support.

S&P 500 ($SPX)


The market began to form an upper level base at about noon that continued for several hours. This gave the appearance of a cup with handle formation attempting to form on the 15 minute time frame. When the channel broke, however, the market failed to provide volume confirmation of the breakout. By hugging the 15 minute 20 period simple moving average, which had hit at the same time as the opening price support in the second half of the morning, the market was able to form a flush of the support ahead of the final hour of trade. The market was able to recover most of those losses with a slightly lower low on the 5 minute charts to form a 2B buy setup that triggered coming out of the final correction period of the day at 15:30 pm ET.

While the market's bias on the daily time frame is rather uncertain at this time due to the rather comparable momentum moves on both the upside and downside, suggesting a continuation of a daily congestion, I am still expecting a larger weekly to monthly correction off this larger support zone that the market has found itself at since the middle of October.

Earnings and Economic Reports This Week

Economic Reports and Events This Week

Monday, November 10, 2008
No economic events are scheduled for today.

Tuesday, November 11, 2008
7:45a.m. ICSC Chain Store Sales Index For Nov 8:
8:55a.m. Redbook Retail Sales Index For Nov 8:
5:00p.m. ABC/Wash Post Consumer Conf For Nov 8: Previous: -48.

Wednesday, November 12, 2008
No economic events are scheduled for today.

Thursday, November 13, 2008
8:30a.m. Initial Jobless Claims For Nov 4 Week:
8:30a.m. Sep Trade Balance: Previous: -$59.1B
10:00a.m. DJ-BTMU Business Barometer For Nov 3:
2:00p.m. Treasury Budget

Friday, November 14, 2008
8:30a.m. Oct Import Prices ex-oil and Export Prices ex-ag
8:30a.m. Oct Retail Sales: Previous: -1.2%.
8:30a.m. Oct Retail Sales, Ex-Autos: Previous: -0.6%.
10:00a.m. Sep Business Inventories: Previous: +0.3%.
10:00a.m. Mid-Nov Reuters/U Mich Sentiment Index: Previous: 57.5.


Key Earnings Announcements This Week:

Monday, November 10, 2008
Before: KDE, ABMD, ACMR. FEED (?), ALD, ACAS, AIG, AOB, ASCA, AHR, ARJ, ARQI, GIB, CNK, CCO, CLWR, CODI, CYPB, DISH, ENER, FNM, FTR, FTEK, GMET, GLG, HWCC, IART, ISIS, LNY, NNI (?), NT, NVAX, ORBC, OFG, PEIX (?), PWRD, PEC, PLUG, RDNT, ROSE, SRE, SIRI, SIX, SUG, STRL,, TRS, TNP, TSN, WCRX, YTEC
During: CNTY
After: APP, ASEI, BIDZ, CALP, CPE, DXCM, DTSI, ENOC, ECEP, FMCN, FTD (?), HRC, HPT, IBNK (?), IPAR, KFN, LFG (?), LGF, MRX, MRGE (?), MWY, MR, MIVA, OWW, QGEN, REG, ROK, SENO, SBUX, SNS, STEC, THRM, TMA, OVEN, VM, XOMA

Tuesday, November 11, 2008
Before: ALLT, CCG, CATM (?), FOSL, FNDT, FUQI, LIZ, HZO, NGPC, PPC (?), ELOS, TJX, TYC
During: -
After: APU, ATO, BPHX, BOBE, BRKS, CTHR (?), CFSG, COMV, CNQR, FNET, GIVN, HOLX, HMIN, ICXT (?), IPI, IPCM, MELI, MSFT, SMTL, SPC, UGI, WES

Wednesday, November 12, 2008
Before: ACM, FLY, CSIQ (?), DSX, DPS, GMCR, HQS (?), IGLD, JASO, M, TYPE, NICE, ORCT, SMA, NGLS, TRI
During: VIVO
After: ANW, AFCE, APEI, AMAT, CALL, CHIC, CSC, CROX, ESE, GA, LVS (?), NTES, NTAP (?), SINA, TTEK

Thursday, November 13, 2008
Before: AES (?), CHNL (?), CPA, CRYP, DRQ (?), FCSX, FIG, FREE, FSIN (?), GSOL, GSIG (?), ITWO (?), KLIC, MMS, MPEL, NSSC, NJR, OHB, PAAS, RAH (?), SI, GASS, TEF (?), UNCA, URBN, WMT, WNS, YGE, ZOLL
During: -
After: ANSV (?), ARTE (?), CHLN (?), CLNE, DNDN (?), DIET (?), ETEL, GGB (?), LRN, KEYN, KSS, LEE, MDTH, MSCC, MTSC, JWN, NVTL (?), PSPT (?), VSE (?), WGL

Friday, November 14, 2008
Before: JOBS, ANF, A, GSI, HEW, JCP, SPH
During: -
After: GOL

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.

Momentum Reversal Holds Fast

(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.)

Good day! For the second day in the row the market experienced a return of the sharp selling it had not seen since earlier the previous month. On Wednesday the indices had triggered the sharper breakdown flush I had warned about as a result of the shift in momentum which had occurred from the 29th of October into the highs on the 4th and 5th of November. The indices had formed three highs within a channel during that time. The market broke lower into Wednesday morning on a smaller version of the same pattern, but the larger one triggered on a 120-minute time frame into Wednesday afternoon.

The index futures hit initial support and the first target level on the Nasdaq 100 eMini futures in afterhours trade on Wednesday. This had left me looking for a correction off this support zone into Thursday with the potential for another secondary continuation of the move. Instead of holding to form an intraday correction, however, the larger strength of the momentum reversal won out. The index futures did still correct, but only during afterhours trade. Within an hour of the day's close on Wednesday the market began to fall into a trading range. The range continued into 4:00 am ET when the volatility picked up somewhat. The range itself, however, continued into the opening bell. At that point a third test of lows in Thursday's premarket trade gave way and the selling resumed at a steady pace throughout the morning.

Nasdaq Composite ($COMPX)


The S&P 500 and Dow Jones Industrial Average had the most steady trend action on Thursday. Unfortunately, the action throughout most of the day left little opportunity for the typical continuation types of setups many trend days offer. The steady selling with strong overlap from one bar to the next on the 5 and 15 minute time frames opened the market up for the strong risk that the indices could spike quickly at any of the 15 minute support levels on the way down and made it difficult to set decent stop levels on continued downside action. Even a break lower with a tiny bear flag on the 2 minute chart around 10:30 ET left risk of a double bottom on that time frame or a 2B reversal.

The Nasdaq, in fact, could not adequately break those lows and held support at the 10:45 ET correction period. It attempted a 2B with a slightly lower low than compared to 10:00 ET. It failed to break the 5 minute 20 sma resistance, however, and the index fell into a trading range into noon. Many of the Nasdaq's core index components fell into low level bases as well. At noon the index attempted to break lower, taking stocks such as Apple (AAPL) and Amazon (AMZN) with it. The 5 minute 20 sma served as resistance, but by this point the larger time frames were already extremely extended and the pace of the breakdown was relatively weak compared to the earlier selling.

Dow Jones Industrial Average ($DJI)


By 13:30 ET the indices were starting to approach their next major 120 minute support levels from the highs of October 27th. The market formed a small 5 minute momentum reversal pattern that triggered into 14:00 pm ET, but this merely led to a two-wave bounce followed by another reversal into the final hour of trade. This took the indices into a stronger test of the support zone from the 27th's highs. The support zone held well, leading to a 2B on the 15 minute time frame that triggered into the closing bell. The highs from the 27th have still not hit exactly, so there is the potential for yet another test of this zone, creating a momentum reversal buy setup that can turn things back around into the new week.

S&P 500 ($SPX)


On Thursday the Dow Jones Industrial Average ($DJI) extended its losses by 443.48 points, or 4.8%, at 8,695.79 at the closing bell. All of the Dow's 30 components finished in the red. General Motors (GM) showed the sharpest decline, falling 13.7% on the day. Alcoa Inc. (AA) had the second largest losses of 13.05%. American Express (AXP) was the third component to shed more than double digit losses, falling 10.46%.

The S&P 500 ($SPX) also fell sharply, down 47.89 points, or 5%, to close at 904.88. Energy shares, financials, and industrials fronted the losses on the S&P 500. Meanwhile the Nasdaq Composite ($COMPX) fell 72.94 points, or 4.3%, to close at 1,608.7.

Volume has picked up over the past two days since the indices took a turn to the downside. On the New York Stock Exchange the decliners outpaced advancers by 5 to 1, while they outpaced them by about 11 to 1 on the Nasdaq.

After two weeks of congestion, crude oil futures hit new 19-month lows of $60.16 a barrel on Thursday. It closed lower by 7% at $60.77 a barrel. This amounts to more than a 58% decline since peaking in July. Gasoline prices have also continued to fall, averaging $2.34 a gallon on Thursday, which is a decline of 53% since its highs of $4.114 a gallon in July.

The dollar has also corrected over the course of the past two weeks, hitting the 20 day simple moving average support zone on Wednesday with a two-wave pullback within the range. It has room to push higher before the week's end with the previous highs as resistance. Since the previous congestion also lasted approximately the same length of time as this, the dollar has potential to push to new highs on the year. This would also mean yet another push to new lows on oil for the year.

Election Day Euphoria Deflates

Election Day Euphoria Deflates

(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.)

Good day! The dismal state of the economy once again took center stage on Wednesday as the market repeated its actions following the passage of the "bailout package" about a month ago. In other words: "SELL THE NEWS!" I was up until 2:00 am ET Wednesday morning patiently waiting for this to begin to take place, but finally the index futures shifted. They sold off very quickly once the early morning congestion following Obama's victory speech gave way.

Support hit heading into the 5:00 am ET correction period. By this point the futures had begun to form a momentum reversal with rounded lows on a 5-15 minute time frame from 3:00 onwards at support from the 15 minute 200 period simple moving average on the all-sessions charts. This was also price support from previous 15 minute lows on Tuesday. The result was a sharp pop into the next major premarket correction period at 7:00 am ET. The bounce retraced slightly more than 50% of the previous decline, but the larger momentum bias was now pointing lower and the indices fell back once again into the opening bell.

Nasdaq Composite ($COMPX)


Prior to the bell, at 8:15 am ET, the ADP employment report was released, indicating an estimated decreased of 131,000 nonfarm payroll employment in October. This again confirms economic distress, but it failed to have any strong impact upon the indices in premarket trade and the futures merely continued to correct off the 7:00 ET highs.

The move lower into Tuesday's open came in the form of two waves of selling. This selling continued into 10:00 ET when the Institute for Supply Management reported that non-manufacturing sectors of the U.S. economy contracted sharply in October by coming in at under 50. The ISM index fell from 50.2% in September to 44.4% in October. This news comes just two days after the ISM reported that its manufacturing index hit a 26-year low. As the saying goes, however, you should always focus upon playing the reaction to the news as opposed to the news itself. Even though the report was pessimistic, the market had begun to form a buy setup in the form of a 15 minute cup-with-handle in the S&P 500. Once the ISM data came out this pattern triggered. Granted, the larger time frames had already shifted to a bearish bias, but the smaller time frame setup still helped the market rally off a double bottom in the form of a 2B on the intraday charts.

The S&P 500 and Dow Jones Industrial Average both had the best early morning buy setups as a result of the slightly lower lows on the 5 minute double bottoms. This created a form of a bear trap. The Nasdaq has also been much weaker in many of the moves recently, so the action early on Wednesday morning was a continuation of this weaker bias. All three of the indices managed to make it back to their 15 minute 20 period simple moving averages intraday, but these served as very strong resistance levels which hit at the same time as the 10:45 am ET correction period.

Dow Jones Industrial Average ($DJI)


The market broke very easily to new intraday lows after testing the 5 minute lows for the third time shortly before noon. Even though this was 5 minute 200 sma support in the S&Ps and Dow, it held for only about 15 minute before giving way. The selling continued steadily past the 12:30 ET correction period before finally stalling at Monday's lows in the Nasdaq. Notice that volume did not spike on the 15 minute time frame when this low was established. Even though the indices held support just after 12:30 ET, the lack of volume indicated that the selling was not yet finished for the day. As a result, I did not expect the 15 minute 20 sma to be able to break on the upside. In fact, the market didn't even make a exact retest of that resistance level, even though prices did pull higher into the zone of resistance. They did so coming off a slightly lower low and an attempt at a 2B reversal. This offered a great scalp, but the larger time frames allowed no room for much greater aspirations.

The indices attempted to form a 5 minute Phoenix into 15:00 ET, but the 15 minute 20 sma limited the upside potential and the second low which needed to hold within the base itself on a two minute time frame to trigger the scalp for a buy failed to hold. This failure confirmed the continuation pattern on the 15 minute time frame of the larger downtrend and selling continued into the 15 minute 200 sma with a closure into the day's lows.

S&P 500 ($SPX)


The sharp decline on Wednesday left the Dow Jones Industrial Average ($DJI) down 486.01 points, or 5%, at 9,139.27 at the closing bell. Citigroup (C) and Bank of America (BAC) both posted double digit percentage losses, while the other 28 out of the 30 Dow components also closed in negative territory.

The S&P 500 ($SPX) was also hit hard by losses in financials, materials and consumer discretionary shares, but each of its 10 industry sectors also closed lower for the day. The index as a whole fell 52.98 points, or 5.3%, to close at 958.00. Meanwhile the Nasdaq Composite ($COMPX) experienced the largest percentage loss at -5.5%, down 98.48 points to close at 1,681.64.

On the New York Stock Exchange the decliners outpaced advancers by 4 to 1, while they outpaced them by about 10 to 1 on the Nasdaq.



Wednesday's breakdown confirmed a momentum reversal pattern on the 120 minute time frame in the indices. The market had spiked into highs on the afternoon of the 29th after an extreme rally the day before. This was then followed by a second high on the 31st and a third on November 4th. Each of these three highs and the valleys between them created a momentum shift on the larger time frames which allowed for the rapid downside flush I warned about the other day. This pattern has hit initial support, but can now very easily continue into next week, depending upon how it reacts to this support level. We will either see more of an Avalanche on this larger time frame form with more of a congestion type of base or if the market bounces more quickly tomorrow then a second more gradual drop can form a two-wave continuation pattern for an upside breakout again next week on the 120 minute time frame.

At this point the downside move is a bit extended intraday, but stronger support is still at the lows from the 29th. Overall I am looking for a move higher on Thursday, but expect the best setups to be on the smaller 5 minute time frames. Most of the daily charts show a bearish bias, but the extension on the weekly time frames makes risk on shorts as swingtrades much higher at this point, so I would approach these low-level bases and bear flag type of formations with a great deal of caution. The chances for false breakdown triggers followed by reversals to hold the weekly support are high.

Election Day Euphoria

(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.)

Good day! The market broke free of its 30 minute trading range in the early morning hours on this historic election day. After a brief flush into 3:00 am ET, the indices began a more rapid ascent which continued into the 7:45 ET ICSC chain store sales data. Chain store sales increased 0.6% in the week ending November 1st. This was up from the 0.5% gain in the previous week. The index futures pulled back from this point into the opening bell and beyond, correcting in two waves on a 5 minute time frame.

Despite the premarket correction, the indices still gapped strongly higher on Tuesday. This was a breakaway type of gap which meant that the highs of the 30 minute range, as well as the gap closure, would serve as major support levels for the market. The pullback from premarket highs continued into 10:00 am ET. At this point the indices were hit with another round of economic data. The Commerce Department reported that orders for U.S. made factory goods fell sharply in September for the second month in a row, down an estimated 2.5% after a revised decline of 4.3% for August. They had been expected to fall 0.2%, but orders for nondurable goods dropped 5.5%, which was substantially more than had been anticipated.

Nasdaq Composite ($COMPX)


Despite the seemingly negative data, the market reversed course following its release. Prices picked up rather quickly in fact. By 10:15 ET the index futures were confirming the reversal with a break of the downtrend channel on a 5 minute time frame. Within half an hour the market was breaking to new highs intraday. This move continued into the 11:00 ET correction period. At this point the indices were also hitting an equal move resistance level on a 15 minute time frame on the S&P 500 ($SPX) and Dow Jones Industrial Average ($COMPX). This is shown on the charts in blue.

The market began to shift once this larger time frame resistance hit. The S&Ps and Dow both formed 2T patterns on a 5 minute time frame by hitting a very slightly higher high heading into noon. The pace going into this second high was still on the strong side and this prevented the indices from heading sharply lower into the early afternoon. Instead the market fell into a range along mid-day support level, finally giving way around 14:00 ET with this major afternoon correction period.

Prices fell sharply into the 15 minute 20 period simple moving averages. The market congested into the 5 minute 20 sma before continuing the breakdown into the final hour of trade. Support hit from the morning's flag break at 15:00 ET. As in the previous session, the market used this time zone to again turn higher. This confirmed a two-wave correction on a 15 minute time frames, setting up a buy trigger once again on this time frame even though the base on the 30 minute charts was only about half the previous congestion. The rally was still enough, however, to allow the indices to close at the day's highs, which then held into afterhours trade awhile the market awaited the presidential election results.

Dow Jones Industrial Average ($DJI)


Tuesday's session closed with a gain of 305.45 points, or 3.3% in the Dow Jones Industrial Average ($DJI). The Dow closed at 9,625.28. 29 of the Dow's 30 components closed in positive territory. Caterpillar Inc. (CAT) led the gainers, rising 8.31% for the day, while General Electric (GE) rose 7.62%. The sole loser was Hewlett Packard Co. (HPQ), which fell 0.96%.

The S&P 500 ($SPX) rose 39.45 points, or 4.1%, and closed at 1,005.74. This is the first time is has closed above the 1k level in over three weeks. All 10 of the S&Ps 10 industry groups posted gains, led by the energy, financials, and materials sectors. Health care and utilities were the weakest.

The Nasdaq Composite ($COMPX) rose 53.79 points, or 3.1%. It closed at 1,780.12. Apple Inc. (AAPL) rose 3.8% on Tuesday, while Google Inc. (GOOG) climbed 5.9%, and Yahoo Inc. (YHOO) rose 4.7%.

Commodities rose alongside the overall market. Gold futures rose $30.50 an ounce, or 4.2%, to close at $757.30 an ounce. Oil futures climbed 10.4% for the December contract and closed at $70.53 a barrel. While oil rose, the dollar fell against the euro. The dollar index (DXY) closed lower by 0.2% at 84.61.

S&P 500 ($SPX)


Immediately following the apparent victory by Barack Obama in the 2008 U.S. presidential election, the market held up and even pushed slightly higher, but by 2:00 am ET the tide had shifted. The index futures shifted sharply lower. Obama's victory was widely anticipated, but by no means certain. Once it became such, however, we started to see the typical "sell the news" reversal. The daily charts of the indices are still quite bullish, but as of 3:00 am ET the markets are looking most likely to continue lower into the morning trade.

Election Day at Last

Election Day at Last

(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.)

Good day! The market's formed a nice double bottom just over a week ago, but over the past several days they have once again been in corrective mode. The pace of the upside shifted substantially mid-week last week when the indices ran into resistance at their 20 day simple moving averages. They have now, however, reversed course. Instead they have fallen into more of a congestive range along the resistance as Tuesday's elections approached. Volume was very light on Monday on the eve of the U.S. presidential elections. On the whole the indices closed relatively unchanged on the day.

The Dow Jones Industrial Average ($DJI) fell 5.18 points to end the session at 9,319.83. Gainers and losers were fairly evenly displaced with 16 of the Dow's 30 components closing in the red. General Motors (GM) was one of the worst hit when it reported that sales fell 45% last month compared to the previous October. Walt Disney Co. (DIS) and Home Depot (HD) topped these losses, however, as traders worried about consumers continuing to back away from excess spending. DIS fell 5.4%, while HD dropped 6%. Telecoms led the gainers. AT&T (T) climbed 3.9%, while Verizon Communications (VZ) rose 3.6%.

The S&P 500 ($SPX) shed 2.44 points on Monday and ended the day at 966.31. Telecommunications also led the gainers in this index. Sprint Nextel Corp. (S) alone climbed 27.8%. The Nasdaq Composite ($COMPX) gained 5.38 points and closed at 1,726.33.

Nasdaq Composite ($COMPX)


Early morning economic data on Monday continued to confirm that the economy is currently in a recession. The Institute for Supply Management reported that its index fell from 43.5% in September to 38.9% in October. This was further than the 41.5% that had been anticipated. Readings under 50% indicated that there are a greater number of firms contracting than there are growing and expanding. The October number is the worst level reported since 1982.

Dow Jones Industrial Average ($DJI)


Monday's session began on a strong note. Despite opening slightly lower, the indices trended higher out of the opening bell. They struggled with the first reversal period at 9:45 ET though. At this point the market was coming into resistance from the previous session intraday on the smaller 2-5 minute time frames. The resistance held and the indices pivoted, but they failed to gain downside momentum and instead fell into a trading range.

The morning range was accompanied by a sharp decrease in volume as more and more market participants moved to the sidelines, unwilling to force any larger positions into elections. Some smaller buy setups took place in the second half of the morning, but the indices were unable to break through the morning highs and instead they rolled over at intraday resistance and ultimately formed a choppy but steady downside trend throughout the majority of the afternoon before recovering with a modest rally in the final hour of trade.

S&P 500 ($SPX)


I have very little advice to offer this election day. Although I've traded through a few of these in the past, my memory of them is rather weak and there doesn't seem to be a really strong consensus as to how to approach them. Prior to November 7th, 1984 the New York Stock Exchange was closed on election day, but with the advent of online access this had changed in the past 24 years. Given that the presidential election only takes place every four years, this leaves us with very little data to compare. The chances are strong, however, that trading will remain light as market participants patiently (or perhaps not-so-patiently in some cases) await the final tally. I do not expect to be very active myself and will merely focus on setups on smaller time frames intraday. Even though the daily charts remain extended, the breakdown on Monday afternoon was weaker than the move Friday afternoon and leaves things more undecided with the potential for a break in the range in either direction on a 30 minute time frame.

Market Adds to the Week'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.)

Good day! Friday's session began with a rocky start. Even though they spiked into Thursday's close and into immediate afterhours trade, the index futures turned lower into early trade on Friday. They rounded off at premarket lows between 3:00-8:00 am ET and triggered a buy into 8:00 am. At 8:30 the Commerce Department stated that U.S. consumer spending experienced its largest drop in four years in September, but the market took the news gracefully after having already expected to see confirmation of such a decline. Consumer spending had remained flat over the summer, but then fell 0.3% in September. This amounts to a 0.4% decline over the course of the past year and the latest data points strongly to a recession underway. Meanwhile personal incomes increased 0.2% following an increase of 0.4% in August. This difference helped increase personal savings as well. It rose to 1.3% in September from 0.8% in August. Adding to the negative news for the economy, shortly after the opening bell the Chicago Purchasing Managers reported that the Chicago PMI fell to 37.8 in October. This is its lowest level since May 2001.

Nasdaq Composite ($COMPX)


The market rallied strongly after bottoming a week ago with a second test of lows for the month. Most of this rally took place on Tuesday and into Wednesday afternoon, but the indices did a decent job of holding onto those gains and even adding to them slightly by week's end. I was initially looking for some added corrective action off the mid-week highs on Friday due to the slower upside on Thursday afternoon and the start of a breakdown into the close. This would have helped extend the 60 minute base at highs with potential for a stronger break of the 20 day simple moving average into the new week. Instead the market gapped slightly lower into Friday morning, but then pivoted out of the 9:45 ET correction period after a slower move lower into that time zone. This confirmed a continuation of the bullish bias.

Dow Jones Industrial Average ($DJI)


Several factors kept the market from regaining the strength seen in Tuesday's initial upside break. First of all, the correction off the highs following that move was not long enough in time to allow the market to pick up where it left off. For a move of such magnitude to be repeated it would have taken about a week or slightly more before it would be able to resume. Adding to this was the rounding off at highs with the pace slowing into Wednesday on slightly higher highs on the 30 minute time frame. This constant attempt at new highs creates a series of traps that shifts the larger pace of the move. The larger 60 minute shift in pace continued into Friday when the early morning bias on the 5 minute time frames remained bullish.

The market formed a nice base/gradual pullback out of the 10:15 ET correction period and into the 10:45 ET one. This triggered a buy intraday into 11:00 ET. This setup was repeated with a bull flag into 12:30 ET along the same support channel intraday, which is shown on the S&Ps and Dow. Even though the momentum increased with each of the waves of buying intraday, the 60 minute charts still barely broke to new highs on a relative basis and held the upper trend channel made by previous highs.

S&P 500 ($SPX)


The third push higher into 13:30 ET exhausted the intraday trend move. The market formed a two-wave pullback into about 14:30 ET, but the pace was beginning to puck up a bit more on the downside. The lower channel support shown in green intraday still held, but the intraday trend exhaustion prevented this fourth attempt to move higher from breaking to significantly higher highs and instead created a trap pattern I call a 2T (a form of double top with the second high slightly higher than the first.) This move into the 2T was also in the form of two waves, which also serves to show a change in the trend bias. The fact that the indices hugged the 5 minute 20 sma and made new highs on relatively light volume provided further confirmation.

The breakdown from this point was very rapid. The reversal took out all of the afternoon gains, but the market did manage to find support at previous 5 minute lows in the zone of the 5 minute 200 period simple moving average and bounced back quickly in the final 5 minutes of trade to cut the late day losses by about half.



Since turning higher off lows on Tuesday, volume has been backing off in the indices, but it still came close to 1.6 billion on the New York Stock Exchange and nearly 1.1 billion on the Nasdaq. Advancers outpaced decliners by more than 2 to 1 on the NYSE and 3 to 1 on the Nasdaq.

The Dow Jones Industrial Average ($DJI) closed higher on Friday by 144.32 points, or 1.6%, at 9,325.01. For the month of October as a whole the index lost 14.1%, but in the past week alone it managed to gain 11.3%. The financials performed well on Friday and led the gainers on the Dow. J.P. Morgan & Chase (JPM) gained 9.65%, while Bank of America (BAC) rose 6.10%, American Express (AXP) climbed 5.53%, and Citigroup (C) came in 4th with a gain of 4.12%. Despite the strong gains for the index overall, seven of the Dow's 30 components closed in negative territory. The worst performer was General Motors Corp. (GM), which fell 4.61%.

The S&P 500 ($SPX) rose 14.66 points, or 1.5% on Friday and closed at 968.76. Financials also led the gainers in the S&Ps with additional strength from consumer discretionaries. Utilities fronted the losses. The S&P 500 also had an extremely poor month, its the worst since October 1987. It shed 16.9% over the course of the month, but it also rose substantially last week and managed to gain 10.5% on the week.

The Nasdaq Composite ($COMPX) rose 22.43 points, or 1.3%, and closed at 1,720.95 on Friday. The closing price put the index higher by 10.9% for the week, but the monthly losses still amounted to a staggering 17.7% decline.

The current daily action leaves the market open to the risk of a rapid flush again on a 60 minute time frame due to the gradual upside momentum of the past several days. On the weekly and monthly time frames, however, the bias remains favorable for a longer correction off this current support zone, so I would be very cautious on any plans for longer term shorts at this point since the moves are more likely to be short-lived. Volume has spiked quite strongly on the monthly charts as well, which also is indicative of trend exhaustion on the downside.

Economic Reports and Events This Week

Economic Reports and Events This Week


Monday, October 27, 2008
Sep New Home Sales: +2.7%. Expected: 1.1%. Previous: -11.5%.
Oct Dallas Fed Mfg Production Index: -13.7. Previous: -21.4.

Tuesday, October 28, 2008
ICSC/Goldman Sachs Chain Index For Oct 25: +0.5%. Previous: -1.6%.
Redbook Retail Sales Index For Oct 25: -1.1%. Previous: -1.1%.
Aug S&P/Case Shiller Home Price Index: -16.6%. Previous: -17.9%.
Oct Conference Board Consumer Confidence: 38. Expected: 52. Previous: 61.4.
Oct Richmond Fed Mfg Survey: -26. Previous: -18.
ABC/Wash Post Consumer Conf For Oct 26 -49. Previous: -50.
Two-day FOMC meeting begins.

Wednesday, October 29, 2008
8:30a.m. Sep Durable Goods Orders: Expected: -1.8%. Previous: -4.5%.
2:15p.m. FOMC interest-rate annoucement: Previous: 1.5%.

Thursday, October 30, 2008
8:30a.m. Initial Jobless Claims For Oct 25 Week: Expected: -3K. Previous: +15K.
8:30a.m. 3Q Advance GDP: Expected: -0.5%. Previous: +2.8%.
10:00a.m. DJ-BTMU Business Barometer For Oct 13: Previous: -0.3%.

Friday, October 31, 2008
8:30a.m. 3Q Employment Cost Index: Expected: +0.7%. Previous: +0.7%.
8:30a.m. Sep Personal Income: Expected: +0.1%. Previous: +0.5%.
8:30a.m. Sep Personal Spending: Expected: -0.3%. Previous: Unchanged.
9:45a.m. Oct Chicago PMI: Previous: 56.7.
10:00a.m. End-Oct Reuters/U Mich Sentiment Index: Expected: 57.5. Previous: 70.3.



Key Earnings Announcements This Week:
Monday, November 3, 2008
Before: ASF, AYE, ALVR, AMT, BLC, BRNC, CCRN, DBA, FRP (?), GWR, GT, GBE (?), HWCC (?), IFLO (?), MMP, MNKD (?), MXGL, MBY, MNTA, MFLX, NTE, NSTC, GAS, OSK, PEI, PMI, PRA, RDWR, COL, SRP, SPG, SSYS, SUP (?), SYY
During: ATN (?)
After: ACMR (?), APC, AUDC, ADP, AXTI, BAS, BLKB, BDE (?), CRK, CROX (?), CUTR, DRCO, EDS (?), EOG, EXTR, FST, HGIC, HE (?), HCN, HLF, HIFN, HIMX, IPHS, IBI, IPAS, JCOM, KNXA, LF, LOOK, MA, MXWL, MG, MSPD, MHK, NCIT, N, NPSP (?), OTEX, OEH, VITA, PKY, FACE, PPS, PFG, RACK, RKT, SB, SNTS, SM, SYKE, TK (?), TKLC, TNS, THS, TRID, UDR, VIA.B, VIRL, WMGI

Tuesday, November 4, 2008
Before: ACOR, AFAM (?), AEE, AMCS, AHII, ADM, AGII, AACC, ALC, ATRC, AVA, BIOS, TAST, CHD (?), XEC, COWN, DF, DNR, EMR, ENTG, EXPD, FE, GLBC (?), GTI, GBX (?), HW, HCP, HNT, HPY, HL, HOC, IPCS, JEC, JMP, KALU, LOJN, LPX, MAC, MGA, MVL, MSCS, MYGN, NNN, NURO, TNDM (?), NI, NXG, NWN, OZM, OPXT, OSCI, GLT, PPCO, PER, PPL, RDC, RTI, JOE, SNSS, SWSI, TLM, THC, TEN, TDC, VNO, WTI, WST, WATG, ZGEN
During: SAM (?)
After: AMMD, ANDE, CAR (?), ACLS, NILE, BRE, CBM, CBL, DCT, DXCM (?), EQY, FCH, GSX, GLUU, HLEX (?), HLS, HRP, JKHY, KNDL, KCP, MKL, MAXY, NHP, NLS, NSR, NTLS (?), PZZA, PXD, PRSC, RENT, SPSS, SRSL, SUPG, SMA (?), TMRK, TIE (?), TXCO, UPL, USU, VTR, VSAT (?), VM, WTW, GB

Wednesday, November 5, 2008
Before: AAON, AGU, AIRN, ALTI (?), ABK, WTR, MT (?), ATPG (?), BDX, BBG, BLT, CELL, CSE, CAPA (?), CNP, CHB, CKP, CWEI, CLHB, CTSH, CITP, CGX, COCO, CXR, DWSN, DVN, DLR, DTG, UFS, RRD, DUK, ECLP, EE, ENB, ENZN, FWLT, FCN, GET, GGP, GM (?), GGC, GNA, GVHR, GTN, WOLF, HLCS, HSIC, HSP, IRC, IACI, IHR, IWA, KBALB, KIM, KNOL, KSWS, LINC, LIOX, LL (?), MFB, MMC, MHS, PCS, MF, MDH, TAP, NOOF, NEWS, OHI, OPTR (?), PTIE (?), PKD, PDX, RL, POL, KGS (?), KWK, RDN, RAS, REV, SLE, SBGI, SKYW, TRK, SVR, TTES, TWX, TWC, RIG, USM, VICL, WRES, WW, XTO
During: -
After: TDSC, ATVI, ABCO, ALJ, AIMC, DOX, ACLI, AEL, AOB (?), ARII, ASCA (?), APAC, AHT, AVB, BDN, BEXP, CDNS, CPE (?), CECO, CRL, CHDN, CSCO, CNL, COGT, COHR, CCRT, CNO, CUZ, CCI, TRAK, DEIX, DSCM, DCP, EGLE (?), EVC, EXM, XCO, FIC, FOE, FVE (?), GHDX, GOK, ROCK, GCA, GDP, GXP, HCKT, HVT, HTZ, HIL, HME, HYGS (?), IDSY, ICFI, INSP, TEG, INET (?), IO (?), JJSF, KEG, LFG, LEAP, LPSN, LMIA, MCHX, MMLP (?), MSSR (?), MDR, MEAS, MNT, MBLX, MOVE, NTY (?), NWS.A, NGAS, NVTL (?), OKE, OSUR, ORA, PVA, PAA, RSCR, RUTH, WINS (?), SAFT (?), SLRY, SLXP, SVNT, SCI, SINA (?), SRX, STAN, BEE, SUN, STKL, SHO, SRDX, SUSS, SNCR, TX (?), THQI, TWTC, TRMA, UNTD, URS, VIMC, VOLC, VMC, WRC (?), WFMI, XNPT, ZIPR

Thursday, November 6, 2008
Before: ABMD (?), ABH, AIXD, ACW, ACIW, ADES, AER, AES (?), AKNS, AMRI (?), ALD (?), ABV, ANPI, ANSS, AHR (?), ARD, ARCC, ARIA, AN, BRL, BZH, BLTI (?), BVF, BX, BORL, BRS, CVC (?), CPLA, LSE, CRZO (?), CPHL (?), CBF (?), FUN, CHTR, CSK (?), CDL, CCOI, CNSL, CEG, CEP (?), CLR, CXW, COT, CMLS, CYCC (?), DK, DPTR, DTPI, DTV, DSCO (?), DM, DRQ (?), DUF, DYN, ELON, EPEX (?), EP, EPB, RDEN (?), EPL, ENG, EXLS, FNM (?), FLO, FREE (?), FTO, GEL, GOL (?), GPX (?), GTXI, GPOR (?), HESS, HANS (?), HT, HGG, HDIX, HOS, HUN, ITWO (?), IAG, ICTG, IDA, IKN (?), IMAX, IMCL (?), INCY, VTIV, IPGP, ISIS (?), JRCC, JRT, KG, KOP, LAMR, LXP, LCUT, LINE, MIC, MBI (?), MCCC, MDCI, MPW, TMR, MGPI (?), MITI, MEND, MWIV (?), NDAQ, NGS (?), NRP, NCT (?), NMTI, NRF, NOVN (?), OMX, OHB (?), PCAP (?), PWRD (?), PRFT, PRGO, HK, PCG, PNK, PNCL, PDC, PXP (?), PLA, PBH, PGNX (?), QCCO, PWR (?), ROLL, FRZ (?), RIGL, RSTI, SPP (?), SNH (?), SCR, SKH, SMBL, SNN, SONS, SE, SPC (?), STXS, SHOO, SURW, SFY, SXCI (?), SYPR, TEVA, TICC (?), TWGP, TM, TRS (?), TEL, RMIX, USPH, VCI, VRX, VNDA (?), VTAL, VG, WNR, WLK, WMB, WPZ, WWE, XOMA (?), YGE (?),
During: BUD, DIOD, PARL (?), SYNM (?)
After: NDN (?), ARAY, APKT, ANW (?), AIRM, AMCN, ALKS (?), AMCP (?), AIG (?), ARP, AMSF, ANH, AGO, ATHN, ABTL, AVNX, BYI, BEBE, BIO, BBI, BLG, CPKI, CBOU, CBG, CHINA, CEDC (?), LNG, STV, CSA, CCIX, COGO, CTCT, COSI, CVTX, DAR (?), DCGN, PROJ (?), DWRI (?), DLB, HILL, DRYS (?), BAGL, EMKR (?), EBS, ENH, ETM, EZPW, FLR, FTI, FNET, FSYS, GXDX, GOLF, SRVY (?), GUID, HALO (?), HWK (?), HLYS, HPT, HGSI, HTCH, HYTM, INWK, NSIT, PODD, ITMN, INAP, IRF, INXI (?), JSDA (?), JUPM, KFN (?), LLNW, LOCM, LMNX, MVSN, ME (?), MEDX (?), MRN, MRX (?), MED (?), MAA, MIDD (?), NABI, NCMI, NFG, NFS (?), NKTR, NLST, EGOV, NOA (?), NVDA, OMPI, OCNW, OMRI, ONXX (?), OPTV, OFIX, PRX, PDLI, PSPT (?), PCR (?), PEC (?), POWR, PCLN, PRO, PSA, QCOM, QLTY, RAME (?), , RRGB, RMD, RUBO (?), SONE, SD, SAPE, SGK (?), SWKS, SOMX, SEP, SGY (?), SPSX (?), TBSI, TTGT, TS, KNOT, THRM (?), TMA (?), TLCV, TRMS (?), TRLG, OVEN (?), GROW (?), UEIC, YSI, UTSI (?), VRSN, DIS, WWWW, INT

Friday, November 7, 2008
Before: AYR, CTB, XTEX, XTXI, CYPB (?), DISCA, DFT (?), SSP, F, LNY (?), LPNT, MEA, NAT, RRI, BID (?), S, SRI, SUI, TTI, THI, TRMP, WR, WIN
During: EIX
After: ED, SALM

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.