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FOR THIS WEEK'S POSITION TRADE NEWSLETTER
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Daily
Editorial: |
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Market Remains Mixed Ahead of Wednesday's
Fed
Good morning!
Tuesday was another light volume day for the market as many
participants continued to be hesitant going into tomorrow's FOMC
announcement. The light volume helped perpetuate the divergence between
the major market indices as
a profit warning from Dell weighed heavily on the tech sector, leading
to a show of relative weakness as compared to the S&P 500 and
particularly the Dow. Gold stocks, oil services, energy, utilities and
the airlines contributed to the strength. All posted gains on the day.
The greatest assistance for the Dow Jones Industrial Average came from
General Motors, however, after Deutsche Bank upgraded it to hold from
sell. Semiconductors, biotechs, and homebuilders did not fair as well.
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The day began with a
downside gap in the Nasdaq Composite and S&P 500 and a slight
upside one in the Dow. Congestion then followed as volume dropped off
heading into the 11:00 ET reversal period. At that point the market saw
a push higher. The Nasdaq surged, filling its gap but then halting
abruptly at that resistance level.
The Nasdaq and S&P 500 both fell back to
morning lows heading into the afternoon. The Nasdaq took the fastest
south-bound turn, coming into support at 13:00 ET, while the S&P
500 took until 14:00 ET to reach that zone. While the Dow also
corrected at this time, it was a slow reversal and the index held the
upper third of the day's range. It also came into support at the 14:00
ET reversal period, but in it's case that support was the 15 minute 20
simple moving average.
The volume remained very light for the
remainder of the day, but some rounding off at lows allowed the indices
to pull up a bit ahead of the close. The Dow even managed yet another
new high on the day. "Rounding lows" refers to when an index makes
lower lows to a lesser degree than the prior one and is an indication
that the sellers are waning. Often the index will start to hug an upper
resistance level, like the Nasdaq did along the 5 minute 20 sma, before
then breaking higher.
While the
general consensus is for another rate hike by the Fed tomorrow, there
is a lot more uncertainty with this meeting than most of those over the
last year or so. Even if the rate is raised once more, eyes will be
towards the accompanying statement and what insight it may hold to
upcoming rate levels. The typical reaction to a Fed announcement is a
three wave follow through. The first will be swift, followed by a
counter-move (which may be stronger than the initial reaction), then a
third move back in the initial reactionary direction. Use a lot more
caution throughout the session.
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Economic
Reports and
Events:
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May 10: Crude Inventories
05/05 (10:30 am), FOMC policy statement (14:15 pm)
May 11: Business Inventories
for Mar (8:30 am), Initial Claims 05/06 (8:30 am), Retail Sales for Apr
(8:30 am), Retail Sales ex-auto for Apr (8:30 am)
May 12: Export Prices ex-ag.
for Apr (8:30 am), Import Prices ex-oil for Apr (8:30 am), Trade
Balance for Mar (8:30 am), Mich. Sentiment-Prel. for May (9:50 am
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Earnings
Announcements of Interest: |
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Only stocks with an
average daily volume of 500K+ are
listed. List may not be complete so be sure to always check your
stock's earnings date before holding a position overnight. (A) =
Earnings after the close, (B) = Earnings before the open,
(?) = Earnings time not specified at the time of this writing
May 10:
WEL (?), RIO (?), DCEL (?), DQE (B), ENER (?), HJT (B), GSS (A), IVAN
(?), MIR (?), MT (?)
May 11:
AEM (A), BGO (A), DT (?), EXPE (A), JCP (?), KSS (?), PBY (A), UBB (?),
URBN (06:00 am ET)
May 12:
DRS (B), PBR (?)
Note: All economic numbers
and earnings reports are in lines with those compiled by Yahoo Finance.
Occasionally changes will occur that are made after the posting of this
column.
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