Techs Lead Market Lower

Techs Lead Market Lower

(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! Thursday was a busy day for the markets. Earnings season is in full swing and a lot of economic data and other news events have been impacting the market this week. The markets most recent session felt continued pressure from the bears. The indices had hit new 52-week highs just a few weeks ago, but is now poised to lose approximately 3% for the month of January. The indices plummeted a week ago, hitting daily price support at Friday's close. Since then they have been congesting along lows with slightly lower lows as the momentum of the selloff shifts.

The U.S. dollar hit a six and a half year high against the euro on Thursday with tech and energy shares leading the downside in the stock market. Oil and gold also fell. Crude oil futures ended the session on Thursday at $73.64 a barrel, while gold closed at $1,083.60 an ounce.

Dow Jones Industrial Average ($DJI)


The market opened on a weak note on Thursday. The futures had held the price resistance that hit at midnight the night before and they rolled over at highs going into the opening bell. The Labor Department released the latest data on first-time jobless claims at 8:30 am ET. Claims fell by 8,000 to 470,000 from a revised 478,000 last week. They had been expected to fall to under 450,000, so the news was disappointing. The four-week average of initial claims actually rose, hitting 456,250

The market had already turned lower ahead of the jobs data, but the momentum accelerated into the opening bell. The indices felt little relief until 11:30 am ET with the downtrend remaining strong throughout the morning. The pace did not even slowing enough to test the 5 minute 20 period simple moving average until mid-day. After a final push lower into 11:30 ET, the indices bounced and hugged the upper channel line from the downtrend. This created a Phoenix™ buy formation that triggered soon after 12:30 ET and finally allowed the indices to break through their 5 minute 20 period simple moving averages.

S&P 500 ($SPX)


The S&Ps and Dow had the strongest corrections off the lows. The Nasdaq was weighed down by technology shares. This sector alone ended up finishing the day lower by about 3%. Nevertheless, even the Nasdaq managed to recover some of its morning losses by the closing bell. The afternoon reversal was formed with an initial wave of buying out of the Phoenix™, followed by a pullback into 14:00 ET and then a second push higher into 15:30 ET. The indices then pulled back in the final 30 minutes of trade. The two-wave correction off the lows left the market still feeling bearish and the indices pulled back once again in afterhours trade.

Nasdaq Composite ($COMPX)


The Dow Jones Industrial Average ($DJI) ended the session on Thursday at 10,120.46 with a loss of 115.70 points, or 1.13%. 6 of the Dow's 30 index components posted a gain. Procter & Gamble (PG) was the best-performer with a gain of 1.43%. Bank of America (BAC) rose 1.19%. Boeing (BA) rose 1.02%. Hewlett Packard (HPQ) was the worst-performer with a loss of 3.36%. American Express (AXP) fell 3.21%. Caterpillar (CAT) was the third-worst performer with a loss of 2.96%.

The S&P 500 ($SPX) fell 12.97 points, or 1.18%, and closed at 1,084.53. Eastman Kodak (EK) was the S&P 500's best-performer. It rose 24.63% after beating earnings expectations. Cardinal Health (CAH) followed with a gain of 5.11%, while Regions Financial (RF) rose 4.21%. Qualcomm Inc. (QCOM) was the worst-performer with a loss of 14.24% after it offered a very cautious outlook and several analysts cut their price targets for the stock. Motorola (MOT) was the second-worst with a loss of 12.43%.

The Nasdaq Composite ($COMPX) fell 42.41 points, or 1.91%, and it closed at 2,179.00 on Thursday. Only 10 out of the 100 Nasdaq-100 components posted a gain for the day. The top gainer was Amazon.com (AMZN), which rose 2.67%. Citrix Systems (CTXS) followed with a gain of 1.74%. Qualcomm (QCOM) was the worst-performer. Flextronics Intl (FLEX) followed with a loss of 7.04%, while Symantec Corp. (SYMC) fell 6.45%, and LAM Research (LRCX) fell 6.08%.

One lingering question was answered when Federal Reserve Chairman Ben Bernanke won confirmation by the Senate for a second term by a vote of 70-30. This had been a source of speculation throughout the week. The market didn't find any relief in the news, however. As we head into Friday's session, the market is still testing the week's lows afterhours going into 12:30 am ET. As I wrote on several occasions earlier this month, January is a typical correction period for the market and even though it got off to a slow start, that tendency has really followed through over the past two weeks. Since in this case the correction is a correction from the uptrend that had been in place since last March, we are now looking for it to hold this level of highs on the monthly time frame.