Morning Update: 10/25/2012

A Decisively Negative Day

The stock market indices had a rough day today, despite big gap ups at the opening. The Nasdaq 100 opened strong and moved up to yesterday’s midday highs, but couldn’t get through the 2686 area. The S&P 500 popped to 1420 resistance, and both failed right there. They immediately sold off, particularly the NDX, which dropped dramatically just before the noon hour from 2686 down to 2655. That’s 31 points lower. The S&P 500 fell in a 3-step fashion from 1420 to 1412. They then bounced midday, and formed rising wedges. The FOMC announcement caused some volatility, and the wedges were broken to the downside. They fell steadily into the close before bouncing a bit, only to back off again, but they all closed down on the day.

Net on the day, the Dow was down 25.19 at 13,077.34, 14 points off the low and 80 points off the high. The S&P 500 was down 4.36 at 1408.75, 1 1/2 points off the low and 12 points off the high. The Nasdaq 100 lost 10.47 to 2655.55, 2 points off its low and 31 points off its high.

Advance-declines were 16 to 13 negative on theNew York Stock Exchange, and 13 to 10 negative on Nasdaq. Up/down volume was 2 to 1 negative on New York, with total volume of 641 million shares. Nasdaq traded 1.9 billion, and had a 11 to 7 negative plurality.

Stepping back and reviewing the hourly chart patterns, the indices opened sharply higher, immediately sold off midday, took out support lows on the NDX, but not on the S&P 500. That encouraged traders to buy, but wedges formed, and they were broken in the afternoon. The S&P 500 closed right near yesterday’s lows, and the entire low pullback, as did the NDX.

So we’re in a precarious position here, because any lower levels and we can see a dramatic sell-off. At that point, it may result in a bigger snapback rally, because we will probably be getting oversold enough for a better rally to ensue.



Thursday, October 25

08:30 Initial Jobless Claims – consensus 371K, prior 388K
08:30 Continuing Claims – consensus 3260K, prior 3252K
08:30 Chicago Fed National Activity Index – consensus -0.2, prior -0.87
08:30 Durable Goods Orders – consensus 6.8%, prior -13.2%
08:30 Durable Goods ex Transports – consensus 0.9%, prior -1.6%
08:30 Cap Goods Orders Nondef Ex Air – consensus 0.3%, prior 1.1%
08:30 Cap Goods Shipments Nondef Ex Air – consensus 0.5%, prior -0.9%
10:00 Pending Home Sales – consensus 2.0%, prior -2.6%
11:00 Kansas City Fed – consensus 5, prior 2
11:00 Fed to buy $4.5b-$5.5b notes in 8 to 10-year range
1:00 US selling $28b in 7-year notes
08:30 GBP GDP
21:45 NZD Trade Balance
23:30 JPY CPI
9:30 Spain to sell 3, 4, 10-year bonds
10:30 UK to sell 7-year bonds

Procter & Gamble (PG) EPS 96c
Dow Chemical (DOW) EPS 37c
Starwood Hotels (HOT) EPS 53c
CME Group (CME) EPS 70c
Hershey (HSY) EPS 86c
Coca-Cola (KO) EPS 69c
International Paper (IP) EPS 77c
Raytheon (RTN) EPS $1.27
ConocoPhillips (CP) EPS $1.19
Eastman Chemical (EMN) EPS $1.42
Amazon (AMZN) EPS -10c
Apple (AAPL) EPS $8.87

The home price index rose 0.7%, better than the expected rise of 0.4%. Oil inventories increased by 5.9 million barrels, last week they were up 2.9 million. On Thursday we will get durable goods, initial jobless claims and the Kansas City Fed mfg. index.


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