AFTER MIDNIGHT
Market Commentary by Toni Hansen
December 9, 2003
Good morning gang! After several days and several waves of selling intraday, the market took a break on Monday like we were expecting. We saw a huge amount of divergence, however, between the indices. The Dow far outpaced the SP500 and, especially, the Nasdaq, finishing up 1% by the end of the day. The morning saw the greatest amount of variance as the Dow began to climb right out of the open into the 5 minute 200 sma resistance. The Nasdaq and SP500, however, hit resistance early on with the 15 minute 20 sma and the 15 minute 200 sma in the SP500. The Dow managed to break above this level though, so that it would serve as support into the afternoon.
As the Nasdaq and SP500 hit resistance within the first half hour of day, they began to pullback. The Nasdaq did so most quickly, which was not unusual given that it had corrected the weakest off support from the prior afternoon. The SP500 and Nasdaq continued lower into mid-day with some pretty sloppy trading before hitting support going into 11:00 ET. The Dow throughout this time held a tight range though at highs, with the 5 minute 20 sma serving as support. When the mid-day reversal period hit the market bounced into the 5 minute 20 sma. The SP500 bounced the strongest but both stalled into the resistance and began to pullback with the 12:00 ET reversal period.
On this second intraday decline in the Nasdaq and SP500 the Nasdaq hit a slightly lower low while the SP500 held prior lows. The overall pace on the selling was much more gradual than the prior move, essentially pulling lower along the 5 minute 20 sma. At the same time, volume began to drop off. This is very typical of action leading up to a reversal. It confirmed as the market formed a 5 minute Phoenix by pulling back up to the 5 minute 20 sma around 13:00 ET and then hugging that resistance, finally breaking around 13:15 ET to trigger the Phoenix buy. This led to a strong move into the 5 and 15 minute 200 sma in the SP500. This was also a retest of the morning highs in that index. The Dow also participated in this turn around. In its case, however, the index broke to new daily highs, clearing its base at the day's highs and pulling into highs from several days prior.
As the resistance hit heading into the early afternoon, the SP500 rounded off at highs to create a 2T short setup. This occurs when the market breaks highs only slightly, traps those buying the breakout by hitting resistance right away, and then reverses. The pace on this mid-afternoon reversal was pretty strong, pulling the Nasdaq clear back to morning lows and the SP500 into trend line support while the Dow came into its 15 minute 20 sma support before stalling with the 14:30 ET reversal period. From there the market also make a quick reversal, even faster than the last, to pull clear back up to the resistance. In the SP500 this was the 5 and 15 minute 20 sma and in the Nasdaq it was the 5 minute 20 sma. From there the market stalled for a few minutes before continuing higher on a rally that lasted pretty much into the close, stalling only as the SP500 hit Friday's highs.
Heading into Tuesday we are going into a Fed. day. The typical action on a Fed. day begins with upside out of the open. (With the strong rally into the close on Monday though, this will add some risk so use a bit greater caution since it could get sloppy again.) Then, as the Fed. announcement approaches, the market will tend to slow down a great deal, often even pulling back some. This usually starts about an hour before the 2:15 ET announcement. (Note: 2:15 is more of an estimate than an exact time since it can very up to 5 minutes either way.) Holding daytrades into the announcement is pretty high risk because the market will become very whippy. You generally get three waves of reaction to the numbers. First you get an initial reaction, then a counter-move which is often stronger than the initial move. After that the market will usually fall back into the original post-market direction. For Tuesday most folks are not expecting any change in the rates, but instead will put more emphasis on the tone of the announcement and any changes in language since the prior month.
Upcoming Economic Reports and Events:
Dec 09: Wholesale Inventories for Ovt (10:00 am), FOMC Meeting (2:15 pm)
Dec. 11: Business Inventories for Oct. (8:30 am), Export Prices ex-ag. for Nov. (8:30 am), Import Prices ex-oil for Nov. (8:30 am), Initial Claims 12/06 (8:30 am), Retail Sales for Nov. (8:30 am), Retail Sales ex-auto for Nov. (8:30 am), FOMC Minutes (2:00 pm)
Dec. 12: Core PPI for Nov. (8:30 am), PPI for Nov. (8:30 am), Trade Balance for Oct. (8:30 am), Mich. Sentimental-Prel. For Dec. (9:45 am)
Earnings Announcements of Interest:
(A)= Earnings after the close, (B)= Earnings before the open, (?) = Earnings time not specified at the time of this writing
Dec 09: COST (B), PLAB (A)
Dec. 10: NTOP (A), TOL (B)
Dec. 11: ADBE (A), ADIC (A), BPUR (A), CANI (B), CIEN (B), VRTY (A)
Toni Hansen is a Market Analyst and Trader with www.tradingfrommainstreet.com. She can be reached at Toni@tradingfrommainstreet.com.
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