Market Recoups Some of Last Week's Heavy Losses

Market Recoups Some of Last Week's Heavy Losses

(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 managed to bounce back in a sloppy day of trade on Monday to recoup some of January's heavy losses with the kick off of the new month. The recovery was on lighter volume than the recent decline and appeared to take place independent of the day's economic data. This data included the Institute for Supply Management's manufacturing index which rose from a revised reading of 54.9 in December to 58.4 in January. Construction spending fell 1.2% in December, which was worst-than-expected. November's reading was also revised lower. A separate report showed that personal spending rose 0.2% in December, which was slightly less-than-expected. Personal spending overall for 2009 fell 0.4%.

Dow Jones Industrial Average ($DJI)


In other news on Monday, the White House revealed its 2010 budget. The deficit is expected to increase to $1.56 trillion this year, which is the highest it has been since World War II, but it is anticipated to then decline throughout the remainder of Obama's term.

Monday's session began with a gap higher into the opening bell. It was the least-pronounced in the technology-laden Nasdaq. The Dow had the strongest real relative strength. It opened just under its 5 minute 200 period simple moving average, which served as some initial resistance. Nevertheless, the entire market headed higher in the first hour of trade. Nearly all of the day's gains were made by that point. The indices spent the remainder of the session in a range along these highs. A two-wave correction formed into noon, but the buy trigger came off the lower end of the day's range so it did not follow through with a new high. Instead, the market held resistance at the earlier morning highs. The session ended just a few ticks off these highs.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) ended the session on Monday at 10,185.53 with a gain of 118.20 points, or 1.17%. Only two of the Dow's 30 index components posted a loss and the losses were very small. These included a 0.10% loss in Disney (DIS) and a 0.06% loss in 3M (MMM). The top gainers were Alcoa (AA) (+4.95%), DuPont (DD) (+3.22%), Exxon Mobile (XOM) (+2.72%), and McDonalds (MCD) (+2.34%). The industrials were strong following the stronger-than-expected ISM manufacturing report. A number of other countries also posted strong manufacturing data. Meanwhile XOM reported a 23% decline in profit, but it's fourth quarter earnings of $1.27 a share beat expectations and helped boost its share price.

The S&P 500 ($SPX) rose 15.32 points, or 1.43%, and closed at 1,089.19. The top gainers in the S&P 500 were Massey Energy (MEE) (+7.94%), Nvidia (NVDA) (+7.67%), and Allegheny Technologies (ATI) (+7.42%). One of the top losers was Amazon.com (AMZN) (-5.21%) after it announced that it would be raising its e-book prices following pressure by the Macmillan publishing house.

A strong gain of $1.54 a barrel in crude oil helped lift energy shares. Crude oil futures for March delivery rose to $74.43 a barrel.

The Nasdaq Composite ($COMPX) rose 23.85 points, or 1.11%, and it closed at 2,171.20 on Monday. NVDA was the Nasdaq-100's best-performer, followed by a 7.12% gain in Seagate Tech. (STX). Warner Chilcott (WCRX) was the Nasdaq-100's worst-performer (-6.84%), followed by AMZN.

Nasdaq Composite ($COMPX)


The market will likely continue to hold onto the daily support this week with the increased risk that we will also continue to see greater overlap in price action from one day to the next as the bulls and the bears wrestle it out. The momentum has been shifting over the past week and that momentum shift can easily pull the indices higher to correct more from the recent selling with a price correction, but the Nasdaq will have a more difficult time since the pace of the selling in that index has remained stronger-than-average. Typically this will result in a more gradual correction off support levels.

Market Recoups Some of Last Week's Heavy Losses

(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.)
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Good day! The market managed to bounce back in a sloppy day of trade on Monday to recoup some of January's heavy losses with the kick off of the new month. The recovery was on lighter volume than the recent decline and appeared to take place independent of the day's economic data. This data included the Institute for Supply Management's manufacturing index which rose from a revised reading of 54.9 in December to 58.4 in January. Construction spending fell 1.2% in December, which was worst-than-expected. November's reading was also revised lower. A separate report showed that personal spending rose 0.2% in December, which was slightly less-than-expected. Personal spending overall for 2009 fell 0.4%.

Dow Jones Industrial Average ($DJI)
http://www.tradingfrommainstreet.com/images/FocusLetter/20100202dow.gif

In other news on Monday, the White House revealed its 2010 budget. The deficit is expected to increase to $1.56 trillion this year, which is the highest it has been since World War II, but it is anticipated to then decline throughout the remainder of Obama's term.

http://www.tradingfrommainstreet.com/images/banners/MBT468x60b.jpg

Monday's session began with a gap higher into the opening bell. It was the least-pronounced in the technology-laden Nasdaq. The Dow had the strongest real relative strength. It opened just under its 5 minute 200 period simple moving average, which served as some initial resistance. Nevertheless, the entire market headed higher in the first hour of trade. Nearly all of the day's gains were made by that point. The indices spent the remainder of the session in a range along these highs. A two-wave correction formed into noon, but the buy trigger came off the lower end of the day's range so it did not follow through with a new high. Instead, the market held resistance at the earlier morning highs. The session ended just a few ticks off these highs.

S&P 500 ($SPX)
http://www.tradingfrommainstreet.com/images/FocusLetter/20100202sp.gif

The Dow Jones Industrial Average ($DJI) ended the session on Monday at 10,185.53 with a gain of 118.20 points, or 1.17%. Only two of the Dow's 30 index components posted a loss and the losses were very small. These included a 0.10% loss in Disney (DIS) and a 0.06% loss in 3M (MMM). The top gainers were Alcoa (AA) (+4.95%), DuPont (DD) (+3.22%), Exxon Mobile (XOM) (+2.72%), and McDonalds (MCD) (+2.34%). The industrials were strong following the stronger-than-expected ISM manufacturing report. A number of other countries also posted strong manufacturing data. Meanwhile XOM reported a 23% decline in profit, but it's fourth quarter earnings of $1.27 a share beat expectations and helped boost its share price.

The S&P 500 ($SPX) rose 15.32 points, or 1.43%, and closed at 1,089.19. The top gainers in the S&P 500 were Massey Energy (MEE) (+7.94%), Nvidia (NVDA) (+7.67%), and Allegheny Technologies (ATI) (+7.42%). One of the top losers was Amazon.com (AMZN) (-5.21%) after it announced that it would be raising its e-book prices following pressure by the Macmillan publishing house.

A strong gain of $1.54 a barrel in crude oil helped lift energy shares. Crude oil futures for March delivery rose to $74.43 a barrel.

The Nasdaq Composite ($COMPX) rose 23.85 points, or 1.11%, and it closed at 2,171.20 on Monday. NVDA was the Nasdaq-100's best-performer, followed by a 7.12% gain in Seagate Tech. (STX). Warner Chilcott (WCRX) was the Nasdaq-100's worst-performer (-6.84%), followed by AMZN.

Nasdaq Composite ($COMPX)
http://www.tradingfrommainstreet.com/images/FocusLetter/20100202nas.gif

The market will likely continue to hold onto the daily support this week with the increased risk that we will also continue to see greater overlap in price action from one day to the next as the bulls and the bears wrestle it out. The momentum has been shifting over the past week and that momentum shift can easily pull the indices higher to correct more from the recent selling with a price correction, but the Nasdaq will have a more difficult time since the pace of the selling in that index has remained stronger-than-average. Typically this will result in a more gradual correction off support levels.