Dow Closes Over 14K

Good day! The market posted some strong gains once again on Thursday with a large gap higher into the open following a round of strong earnings and continued follow-through from the late day reversal on Wednesday when the market took off into the close after a great deal of weakness earlier in the session. Leading the rally based on earnings was IBM (IBM) after it reported its strongest quarterly performance since 2002. It gapped higher, continued to run for about 15 minute and then held a trading range for the remainder of the day. By the closing bell it had added 4.78 points and 4.3%. In other news, Juniper Networks, Inc. (JNPR) rose 3.33 points, or 12.5%, following an upgrade by Goldman Sachs from neutral to buy.

By sector, one of the top movers were metals and mining stocks. The index itself climbed 2.4% on the day. One of my favorites was Freeport-McMoran Copper & Gold (FCX). It had pulled back nicely into the 10 day simple moving average on Wednesday and then gapped up slightly on Thursday. After a small 15 minute rally it caught my eye when it fell into a range throughout most of the morning. It took off after hitting the 5 minute 20 sma at the 11:00 correction period and climbed throughout the remainder of the day.

Although the market had more than its fair share of upside breakouts, a number of stocks found themselves facing quite a bit of pressure. Alcoa Inc. (AA) fell sharply after an announcement by BHP Billiton PLC (BHP) that it is not longer considering Alcoa as an acquisition target. Qualcomm Inc. (QCOM) also took a hit when Broadcom Corp. (BRCM) and Verizon Wireless (VZ) announced a licensing agreement that will allow Verizon to sell mobile phones which contain a chip made by Qualcomm which was banned by the U.S. International Trade Commission last month. Verizon announced that as a result, it would cease efforts to overturn the ITC ban.

Other stocks which found themselves under water on Thursday were the financials, which continued to feel the strain of subprime woes. Standard & Poor again downgraded more than 400 mortgage-backed securities. Goldman Sachs Group Inc. (GS) fell 1.5%, Morgan Stanley (MS) dropped about 1.4%, and Merrill Lynch & Co. Inc. (MER) shed nearly 1%.

After the strong open, the market had a really difficult time establishing an intraday bias. The result was that even though the indices are still seeing a bit more upside, the range is essentially still in play on the 60 minute charts and our bias has continued to hold well. A great deal of divergence existed on Thursday between the indices themselves. The Nasdaq Composite held the greatest relative strength, forming a nice breakout setup coming out of 12:00 ET, but the Dow was favoring the bears throughout the mid-day when it failed to break higher with the Nasdaq at noon. The S&Ps leaned towards the Dow's bias.

In the end, all three indices had their way. The Nasdaq broke higher while the Dow and S&Ps still based with slower upside. Then at 2:00 ET the FOMC Minutes were released. The result was a sharp move lower, which broke the Dow and S&Ps out of their range. They fell sharply into the morning lows and the 5 minute 200 simple moving averages. The S&Ps found support at the morning lows, but the Dow moved slightly under those morning lows before it hit its own 5 minute 200 sma. In his release, Federal Reserve Chairman Ben Bernanke told member of the Senate Banking Committee that the pangs felt from foreclosures and delinquencies will "likely get worse before they get better."



After the minutes were released the indices switched roles. The Dow and S&Ps climbed into the close, but while the Nasdaq did pull up somewhat, it stalled shortly after 15:00 ET and fell sharply into the bell. Even with the struggle for upside though, the market still has room on the 60 minutes charts to continue to press the highs. They do look to head slightly lower into the open though, so given the added chop this week, I'll be focusing mainly on the news plays intraday for setups on Friday.

Market Rallies into Record Highs

Good day! The market had a really nice run while I was away! That "bit of strength coming in" turned out to be a wee bit more than just a "bit"! The indices broke higher out of the daily range early on in the day on Thursday after a nice momentum gap. Higher-than-anticipated sales numbers from retailers such as Wal-mart (WMT) and Costco Wholesale (COST) helped quite a bit with the upside. Thursday's gap itself had brought the market into previous highs, so that created some congestion out of the open, but that range was soon breaking to new highs in the latter half of the morning. The trend then continued throughout the remainder of the session, gaining momentum in the final 90 minutes of trading. This momentum continued somewhat into Friday morning for the first 15-20 minutes of the day.



Things did slow down a bit on Friday though after the opening action. The market had become very extended after putting in the strongest upside move of the entire month. The indices fell into a range just as it had the previous morning as volume declined into the 5 minute 20 simple moving average. This range narrowed as it approached that support level and the volume in the market hit its lightest level of the morning just before the indices again broke higher. The S&P 500 and Dow Jones Industrial Average led the move and moved on to record levels, but the Nasdaq, which had formed a lower level congestion, had a difficult time with the initial morning highs and this resistance held all three of the major indices in and led to a second correction coming out of the 10:45 ET correction period.

Market volume declined a great deal over noon on Friday. The second pullback in the market was much more significant than the first, allowing the indices to pull back into the 15 minute 20 simple moving average. When the 12:00 ET correction period hit it held perfectly, pulling up into the 5 min 20 sma with a marked change into momentum, albeit on just a very small intraday time frame. This change in momentum was confirmed, however, by a choppy base for the next 45 minutes of the day, eventually breaking higher around 13:15 ET . Although this breakout lacked the strength of the move into Thursday afternoon, it was nevertheless a steady one, holding the 5 minute 20 sma well into the final half hour of trading. The Dow and S&Ps did break that support in the final minutes of trading, but the Nasdaq spent the afternoon attempting to make up for the ground it had lost earlier in the day and closed within a few ticks of the day's highs.



By the end of the session on Friday, the Dow Jones Industrial Average ($DJI) had made a new record closing high at 13,907.25 (+45.52 points). It ended the week up by 1.8% and is rapidly coming into the 14,000 price resistance level. The S&P 500 ($SPX) gained 1.3% last week, adding 4.80 points on Friday to close at 1,552. This also marked a record closing high. The Nasdaq Composite ($COMPX) had the smallest percentage gain on Friday, but outpaced the S&Ps on the week with a gain of 1.4%. 5.27 points were added to the index on Friday and it closed at 2,707.

Financials such as Merrill Lynch & Co. (MER: +1.2%) and JP Morgan Chase and Co. (JPM: 1.0%) performed very well into the weekend despite a rather wicked start to the week. Nearly all of them jumped sharply on Thursday after turning around on Wednesday off lows and this momentum moved the sector higher into Friday as well.


There was a lot of talk hype week regarding the merger talks between Rio Tinto (RTP) and Alcan Inc. (AL), which it hoped to acquire. Alcoa Inc. (AA), which was viewed as a rival, announced on Thursday that it was withdrawing its bid and the stock rose 4.5% on Friday following the news.

Some other names which made substantial gains on Friday were AAPL, RIMM, PAYX, PDLI, GOOG, WFMI, and SIGM. The market can still creep higher on Monday as some additional follow-through on these gains, but with momentum slowing and several days of upside already under its belt, it's going to be more difficult to sustain the buying and some rapid pullbacks are now a risk on the 5 and 15 minute time frames.




Economic Reports and Events This Week:

Monday, July 16, 2007
8:30a.m. July NY Fed Manufacturing Index. Expected: 17.50. Previous: 25.75.

Tuesday, July 17, 2007
7:45a.m. ICSC Chain Store Sales.
8:30a.m. June PPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.2%.
8:30a.m. June Producer Price Index. Previous: +0.9%.
8:55a.m. Redbook Retail Sales Index. Previous: -1.3%.
9:00a.m. May Treasury International Capital Flows. Previous: $76.5B.
9:15a.m. June Capacity Utilization. Expected: 81.6%. Previous: 81.3%.
9:15a.m. June Industrial Production. Expected: +0.4%. Previous: Unch.
1:00p.m. July NAHB Housing Index. Previous: 28.
5:00p.m. ABC/Wash Post Consumer Confidence: Previous: -9.

Wednesday, July 18, 2007
8:30a.m. June Consumer Price Index. Expected: +0.1%. Previous: +0.7%.
8:30a.m. June CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.1%.
8:30a.m. June Housing Starts. Previous: -0.1%.

Thursday, July 19, 2007
8:30a.m. Initial Jobless Claims. Expected: +4K. Previous: -12K. 10:00a.m. June Leading Economic Indicators. Expected: -0.1%. Previous: +0.3%.
10:00a.m. DJ-BTMU Business Barometer. Previous: -0.2%.
12:00p.m. July Philadelphia Fed Business Index. Expected: 10.0. Previous: 18.0.

Friday, July 20, 2007
There are no economic indicators scheduled for today.


Key Earnings This Week:

Monday: ETN, MAT, MERX, GWW, ADTN, INVX, NVLS, STLY, and UFPI

Tuesday: KO, JNJ, MER, STT, WFC, DTLK, INTC, PHHM, CHIP, YHOO.

Wednesday: ABT, MO, AMFI, BLK, JPM, KLIC, PFE, LUV, STJ, UTX, DOX, CTAS, CBST, EBAY, ISIL, JNPR, LOGI, MOGN, MGI, NE, NVEC, TER, and WM

Thursday: ALDN, AVCT, BAC, BBT, CAL, DJ, FCS, FHN, F, FCX, HON, IGT, IONA, OXPS, SPWR, WYE, AMD, BRCM, GOOG, MSFT, and SNDK

Friday: BSX, C, JRC, KCI, SLB, and WB