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 Creeps Higher, but Shows Exhaustion

Good day! The market opened a hair lower on Monday, showing pressure from the slow down of last week's rally and the hangover it has left in its wake. As I talked about yesterday, the momentum in the indices had begun to wane in Friday's session, but had yet to display any real advance of a bearish bias to correct from that move. The pressure continued to build throughout Monday morning and the indices fell into a choppy trading range in the first half hour of trading, but managed to break higher into the 10:15 ET correction period.

The volume on the 5 minute charts failed to increase with the breakout, indicating a growing concern amongst the bulls over just how long they could hold up without a decent correction on the larger intraday and possibly even daily time frames. I caught a bit of this move in the Dow, which greatly outpaced both the Nasdaq Composite and S&P 500 in the mid-morning ascent, but the increasing risk of rapid flushes as a result of the pace kept me focusing on scalps as opposed to longer intraday holds. This caution became even more important over noon when the pace on the upside slowed even more and began to hug support moving average support levels even as they pushed higher.



The Nasdaq was the first to give way. It broke lower on an Avalanche pattern on the 5 minute charts shortly after noon and pulled back in to the early morning congestion. The S&Ps joined in with a channel break at noon, whereby it also fell under its 5 minute 20 sma support. The Dow still logged a new high, pressing for that 14,000 level and nearly succeeding with a high of 13,989.11. When the Nasdaq and S&P hit their 5 minute 20 sma, however, at about 13:00 ET after climbing on declining volume, the Dow found itself also under a strain and the market fell quickly for several minutes. It ran into congestion when the Nasdaq and S&P hit the morning trading level again, but that soon gave way to a second decline into 14:00 ET. At this point the volume increased on the 5 minute charts as the indices hit support from Friday's session. The ES (S&P EMini) also came into moving average support from the 5 minute 200 sma intraday. All of these support levels hit at the exact same time as the pivotal 14:00 ET correction period and a nice correction was soon under way to trigger a nice buy in the indices.



Up to this point in the session, our expectations heading into the day held very well, beginning with the creeping move higher to the sharper 15 minute corrections off those highs. The rest of the day simply followed suit with a more gradual rally in response to the rapid afternoon decline. The decline was not extreme, however, so the indices did manage to retrace a good chunk of that afternoon selloff, even though it took longer to regain the ground lost than it did to loose it in the first place. The 15 minute 20 sma became the main resistance, much like the 5 minute 20 sma one had been at 13:00 ET. It held perfectly in both the S&P 500 as well as the Nasdaq Composite and the market fell as the closing bell approached, but stalled in the final 15 minutes of trading to hold the ES's 5 minute 200 sma a second time.



The Dow Jones Ind. Average added another 43.73 points by the closing bell and ended the session at 13,950. The S&P 500 and Nasdaq Composite, on the other hand, both posted losses. The S&P 500 fell 2.98 points to close at 1,549, while the Nasdaq lost 9.67 points and closed at 2,697. Declining issues beat out gainers by 11 to 5 on the NYSE and 19 to 10 on the Nasdaq.

In the Dow, 18 out of 30 of the stocks rose on the day. Verizon (VZ) led the pack with early morning gains on the heels of speculation of a takeover by Vodaphone Group (VOD). Vodaphone denied such an interest. Con-way Inc. (CNW), a major trucking company, also made headlines with an announcement on Monday to buy the privately held Contract Freighters Inc. for $750 million. In continuing the surge of buyout speculation, CNW is also considered to be a possible buyout target by DHL. It reports earnings on Wednesday. Dow components KO, INTC, and JNJ all report on Tuesday.

On Tuesday I'm pretty much up for anything. The markets are still showing exhaustion so it appears most likely that we'll continue to see more of a response to this resistance level, particularly since the volume is rather light. There is not enough of a change in momentum yet, however, to confirm the start of any larger pullback and higher highs this week are still quite plausible.