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Dennis Dick & Joel Elconin

Joel’s introduction to trading was in the Standard and Poor’s 500 Index futures pit at the Chicago Mercantile Exchange. Also, during his time at the CME, he was involved in Index Arbitrage as well...

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Market Consolidates Ahead Of Major Earnings Reports

The S&P 500 index futures were range bound Monday-Thursday between 1820 and 1840. This was in anticipation of the Friday's job report. The end result from the non-definitive data was that the index remained range bound.

However, the contract did post a strong close on Friday, near the upper end of the two week trading range. With earnings shifting into full gear this week, beginning on Tuesday with two of the big guns (JP Morgan and Wells Fargo) reporting, any upside surprises could easily nudge the index to new all time highs.

Later in the week, other financial giants like Bank of America, Goldman Sachs and Citigroup will release earnings as well. As the issues have been the early leaders in the market this year, it will be important for them to meet or beat the Street's expectations.

On Friday, the Street will be focused on the results from General Electric (NYSE: GE). The issue, which revisited the 28 handle for the first time in five years, has declined four percent (26.96) since peaking on December 31.

GE is approaching a major support at the 26.85 level, which was the impetus for the rally to 28.09 on December 31. Investors may want to pay attention to how the issue reacts acts at this level and perhaps use it an indication to how the Street is leaning going to Friday's release.

Tech issues, another major component of the index have been sending mixed signals. While Google (NASDAQ: GOOG) sprinted to a new all time high last week., Apple (NASDAQ: AAPL) is going in the opposite direction.

Since beginning the year at 561, the issue has shed nearly 30 points to close at 532.94 on Friday. And with no major support in site until the 525 area, it could be another rough week for Apple shareholders.

Meanwhile, Microsoft (NASDAQ: MSFT) is clinging to the 36 level ahead of its next earnings report. The issue, which vacillates up and down with reports of whether or not Ford CEO, Alan Mulally will take the helm when Ballmer retires, will need the digest the news that he has removed himself as a candidate.

Investors will have to wait until later in the month for earnings updates for these issues and to react the new fundamental data they will provide.

Other leaders in index, oil titans Exxon-Mobil (NYSE: XOM) and Chevron (NYSE: CVX) are going their own ways as well. While Exxon is trading within one point of its all time high (101.74) closing at 100.52 on Friday, Chevron tumbled three points last week from 124.02 to 121.01.

This being the result of the lowered guidance for the fourth quarter from the company on Friday. Finally, high yielding stocks in the index, Procter & Gamble (NYSE: PG) and Johnson & Johnson (NYSE: JNJ) are doing there own thing as well. While Johnson & Johnson changes hands near its all time high (95.99), closing at 94.74 on Friday, Procter & Gamble is hovering above major support at the 80 level, nearly six points from its all time high of 85.82.

With related issues in the same sectors sending mixed signals and the index itself range bound, investors will be focusing heavily on the upcoming earnings reports over the next few weeks.

This is to determine whether or not the great bull market has finally stalled or that traders are just witnessing another consolidation market before the market continues higher into uncharted territory.

This article was written by Joel Elconin.

Posted in: Technicals Intraday Update Trading Ideas