Thursday, July 21, 2011

21 July (Thurs), Evening summary

Markets powered higher today, with S&P 500 E-mini futures (/ES) rising almost continuously from 5:00am CST straight into the after-hours market and tallying a cumulative appreciation of nearly 30 points (from ~1315 to ~1345).

The AH price at the moment –- 1343 @ 19:50 CST –- places /ES at price channel resistance on a 4-hour-bars chart. Should this resistance fail, subsequent selling pressure should develop around 1353, another price channel resistance area from the same chart.

/ES, 4-hour bars:

The daily-bars chart of /ES shows the futures contract had been developing a head-and-shoulders pattern from the start of the year through this past Monday (July 18), but the powerful rallies of Tuesday and today have significantly endangered the pattern’s completion. This is a bullish development, and it would be confirmed with a break above the trendline connecting the two shoulders (currently 1353).

Successful completion of the H&S pattern would require a break below the neckline, currently a price <1263. Of course, that may still transpire; such patterns sometimes have multiple right and/or left shoulders.

/ES, daily bars:

The S&P 500 ETF (SPY) presented a low-risk long opportunity in the market’s opening minutes, when prices opened above the 2.5-month horizontal support / resistance level of $133.20. A pullback to this area was predictably arrested, and prices commenced a renewed ascent that would last the entire session.

SPY, 1-hour bars:

Cisco Systems (CSCO) was a bullish standout in today’s markets, rallying over 3.4 percent. Anecdotally, the top of today’s WSJ contained the headline “Layoffs Deepen Gloom” and covered, inter alia, Cisco’s announcement of earlier this week to shed several thousand positions.

Downsizing had, in fact, overtaken CSCO long ago, as evidenced in the daily-bars chart. The capitulation low of mid-June ($14.78), however, has proven to be a mid-term low. A critical test will be whether CSCO can pierce significant price channel resistance just above, today at $16.62. Even if it eventually does, there is likely to be a short-term opportunity for a low-risk short play.

CSCO, daily bars:

Bank of America (BAC) has been an even more notable performer this week. The stock capitulated to significant price channel support at $9.40 and has since rebounded 9 percent.

BAC, daily bars:

The picture on the hourly-bars chart is just as impressive, with the YTD price action nicely defining the dominant price channel, and with the ex-$9.40 bounce occurring right on cue.

BAC, hourly bars:

A broad-market overview reveals that indices recorded gains in the range of 1 percent. The S&P 500 gained 1.35 percent, the DJIA added 1.21 percent, and the NASDAQ notched on 0.72 percent. These statistics reveal a considerable 0.63 percent divergence between the top-performing of the main three indices (the S&P 500) and the worst-performing (the NASDAQ). The Russell 2000 appreciated by 1.07 percent.

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