Market Continues to Creep Higher on Light Volume
Market Continues to Creep Higher on Light Volume
(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 and Happy New Year! Once again the market continued to creep higher in Tuesday's session, but it lacked the stamina to maintain the momentum of last week's advance. After three strong moves higher on a 15 minute time frame into last Friday's close, the indices were exhausted. They began to manifest that exhaustion with the slowdown in Monday's session. Even though several of the main indices made slightly higher highs, they failed to break previous highs by the same degree as the previous upside moves from last week. The indices sold off on Monday afternoon, but the pace of that selloff was still not strong enough to shift the larger momentum for a greater price correction. Instead the market continued to correct from last week's strength with a slower and more choppy advance. This has been creating the start of the rounding off that I discussed in yesterday's column and led to nice intraday swings to favor the daytraders as we expected.
Nasdaq Composite ($COMPX)
Tuesday's session began with a gap modest gap higher into the opening bell. The upside continued into 10:00 ET, just as Monday's gap action also continued for the first 30 minutes of the day. The indices turned sharply when the 10:00 ET economic data hit. By 10:30 ET the gaps had closed in the S&P 500 and Dow Jones, leaving the Nasdaq as the only one still in position territory. It hit support at this same time at its 5 minute 20 sma and the moving average and gap zone held briefly before selling resumed out of the 10:45 ET correction period. This led to a closure of the morning gap in the Nasdaq as well and took the Dow into its 5 minute 200 sma support zone intraday, which served to turn the market higher mid-day.
The 10:00 market reversal corresponded to the release of the November pending home sales data, the ISM non-manufacturing index, and November factory orders. Overall the data was rather pessimistic, which helped fuel the selloff. The pending home sales data showed that sales contracts on previously-owned homes fell 4% in November, according to the National Associate of Realtors. Meanwhile, the Commerce Department announced that U.S. factory orders fell a record 5.3% the same month. The ISM index rose to 40.6% in December after hitting a record low of 37.3% the month before. This number was better than the 37% economists had been anticipating.
Dow Jones Industrial Average ($DJI)
Although the volume had picked up in the morning's selloff as compared to the comparable time period in recent days, it dropped off again over noon and remained light compared to recent months. The indices moved fairly quickly higher into nearly noon where they hit price resistance from the 10:45 ET zone. The buying continued into the 13:00 ET correction period, but the pace of that buying slowed a great deal in the S&Ps and Dow. The Nasdaq, however, remained strong and continued higher into the zone of the morning highs. That level served as resistance, along with opening prices on the Dow, and the 13:00 ET correction period kicked off another pull lower.
S&P 500 ($SPX)
Albeit on the strong side, this initial afternoon selloff was short-lived. The 5 minute 20 sma again served as support in the Dow and the Nasdaq found support at its opening prices. The indices then congested along this support zone into the 14:00 FOMC minutes. Even though the Federal Open Market Committee expressed a grim economic outlook, the market shot higher following the release of the minutes from December.
After rallying for about 15 minutes following the FOMC release, the pace slowed and shifted. This action was comparable to what we had seen mid-day, as well as on the 15 minute time frame beginning on December 29th when the indices moved rapidly higher into the new year. Once again, this momentum shift created a reversal pattern, just as it had intraday, and the indices sold off into the 15:00 ET correction period. The reversal also corresponded to price resistance from the zone of the early morning highs. Earlier intraday price support, as well as the 5 minute 200 sma in the S&Ps and Dow stalled the move shortly before the closing bell, allowing the indices to hold onto meager gains for the session.
The Dow Jones Industrial Average ($DJI) posted a gain of 62.21 points, or 0.7%, on Monday and closed at 9,015. 19 of the Dow's 30 index components closed in positive territory. The gainers were led by Hewlett Packard Co. (HPQ) (+8.20%), General Motors (GM) (+6.20%), American Express (AXP) (+5.61%), Citigroup (C) (+5.37%), and Du Pont (DD) (+5.01%). The losers included McDonald's Corp. (MCD) (-2.23%), Pfizer Inc. (PFE) (-1.98%), Merck & Co. Inc. (MRK) (-1.83%), and Exxon Mobil Corp. (XOM).
The S&P 500 ($SPX) gained 7.25 points, or 0.8%, on Tuesday and closed at 934.70. Materials stocks were among the strongest for the day. The Select Sector SPDR-Materials (XLB) closed higher by 2.2%. Crude oil futures for February delivery briefing this the $50 a barrel level for an intraday high of $50.47 before settling at $48.58, down $0.23 a barrel. Retail gas prices were up on the day, averaging $1.688 a gallon after hitting a low of $1.616 a gallon on December 31st.
The Nasdaq Composite ($COMPX) continued to lead the indices, thanks to advances in the technology sector on Tuesday, and closed higher by 24.35 points, or 1.5%, to end the session at 1,652.38.
Since the momentum is continuing to shift on the 15 minute time frame, similar to the intraday momentum shifts into 13:00 and 15:00 ET on Tuesday on a 5 minute time frame, I am continuing to favor a stronger break lower once the lower channel from the past two days gives way. This should take the indices very quickly back to their 20 day simple moving averages. Due to the relatively light volume throughout this entire rally since Christmas, it would also be rather easy for the market to retest that holiday price zone.
(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 and Happy New Year! Once again the market continued to creep higher in Tuesday's session, but it lacked the stamina to maintain the momentum of last week's advance. After three strong moves higher on a 15 minute time frame into last Friday's close, the indices were exhausted. They began to manifest that exhaustion with the slowdown in Monday's session. Even though several of the main indices made slightly higher highs, they failed to break previous highs by the same degree as the previous upside moves from last week. The indices sold off on Monday afternoon, but the pace of that selloff was still not strong enough to shift the larger momentum for a greater price correction. Instead the market continued to correct from last week's strength with a slower and more choppy advance. This has been creating the start of the rounding off that I discussed in yesterday's column and led to nice intraday swings to favor the daytraders as we expected.
Nasdaq Composite ($COMPX)
Tuesday's session began with a gap modest gap higher into the opening bell. The upside continued into 10:00 ET, just as Monday's gap action also continued for the first 30 minutes of the day. The indices turned sharply when the 10:00 ET economic data hit. By 10:30 ET the gaps had closed in the S&P 500 and Dow Jones, leaving the Nasdaq as the only one still in position territory. It hit support at this same time at its 5 minute 20 sma and the moving average and gap zone held briefly before selling resumed out of the 10:45 ET correction period. This led to a closure of the morning gap in the Nasdaq as well and took the Dow into its 5 minute 200 sma support zone intraday, which served to turn the market higher mid-day.
The 10:00 market reversal corresponded to the release of the November pending home sales data, the ISM non-manufacturing index, and November factory orders. Overall the data was rather pessimistic, which helped fuel the selloff. The pending home sales data showed that sales contracts on previously-owned homes fell 4% in November, according to the National Associate of Realtors. Meanwhile, the Commerce Department announced that U.S. factory orders fell a record 5.3% the same month. The ISM index rose to 40.6% in December after hitting a record low of 37.3% the month before. This number was better than the 37% economists had been anticipating.
Dow Jones Industrial Average ($DJI)
Although the volume had picked up in the morning's selloff as compared to the comparable time period in recent days, it dropped off again over noon and remained light compared to recent months. The indices moved fairly quickly higher into nearly noon where they hit price resistance from the 10:45 ET zone. The buying continued into the 13:00 ET correction period, but the pace of that buying slowed a great deal in the S&Ps and Dow. The Nasdaq, however, remained strong and continued higher into the zone of the morning highs. That level served as resistance, along with opening prices on the Dow, and the 13:00 ET correction period kicked off another pull lower.
S&P 500 ($SPX)
Albeit on the strong side, this initial afternoon selloff was short-lived. The 5 minute 20 sma again served as support in the Dow and the Nasdaq found support at its opening prices. The indices then congested along this support zone into the 14:00 FOMC minutes. Even though the Federal Open Market Committee expressed a grim economic outlook, the market shot higher following the release of the minutes from December.
After rallying for about 15 minutes following the FOMC release, the pace slowed and shifted. This action was comparable to what we had seen mid-day, as well as on the 15 minute time frame beginning on December 29th when the indices moved rapidly higher into the new year. Once again, this momentum shift created a reversal pattern, just as it had intraday, and the indices sold off into the 15:00 ET correction period. The reversal also corresponded to price resistance from the zone of the early morning highs. Earlier intraday price support, as well as the 5 minute 200 sma in the S&Ps and Dow stalled the move shortly before the closing bell, allowing the indices to hold onto meager gains for the session.
The Dow Jones Industrial Average ($DJI) posted a gain of 62.21 points, or 0.7%, on Monday and closed at 9,015. 19 of the Dow's 30 index components closed in positive territory. The gainers were led by Hewlett Packard Co. (HPQ) (+8.20%), General Motors (GM) (+6.20%), American Express (AXP) (+5.61%), Citigroup (C) (+5.37%), and Du Pont (DD) (+5.01%). The losers included McDonald's Corp. (MCD) (-2.23%), Pfizer Inc. (PFE) (-1.98%), Merck & Co. Inc. (MRK) (-1.83%), and Exxon Mobil Corp. (XOM).
The S&P 500 ($SPX) gained 7.25 points, or 0.8%, on Tuesday and closed at 934.70. Materials stocks were among the strongest for the day. The Select Sector SPDR-Materials (XLB) closed higher by 2.2%. Crude oil futures for February delivery briefing this the $50 a barrel level for an intraday high of $50.47 before settling at $48.58, down $0.23 a barrel. Retail gas prices were up on the day, averaging $1.688 a gallon after hitting a low of $1.616 a gallon on December 31st.
The Nasdaq Composite ($COMPX) continued to lead the indices, thanks to advances in the technology sector on Tuesday, and closed higher by 24.35 points, or 1.5%, to end the session at 1,652.38.
Since the momentum is continuing to shift on the 15 minute time frame, similar to the intraday momentum shifts into 13:00 and 15:00 ET on Tuesday on a 5 minute time frame, I am continuing to favor a stronger break lower once the lower channel from the past two days gives way. This should take the indices very quickly back to their 20 day simple moving averages. Due to the relatively light volume throughout this entire rally since Christmas, it would also be rather easy for the market to retest that holiday price zone.
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posted by Toni Hansen @ 9:44 PM
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