Good day! The latest jobs data brought a smile to the faces of the bulls in Thursday's session and extended the already strong gains made on the week in the market. After Wednesday's sharp rally, the index futures were stuck in a trading range heading into Thursday morning. The upper-level congestion following that rally was already bullish, but the 8:30 a.m. ET unemployment data served as the trigger for continued buying early in the day.
Dow Jones Industrial Average
The Labor Department reported on Thursday morning that first-time claims for unemployment benefits were down 21,000 to 454,000 last week, compared to 475,000 the week before. Analysts had been anticipating a drop of 12,000. Meanwhile, continuing claims fell to 4.41 million, which is their lowest level since 2008.
Although it seemed to have very little impact on the price action of the U.S. indices, a few other events made the economic headlines on Thursday. For one, the International Monetary Fund (IMF) increased its 2010 world GDP forecast from 4.2% to 4.6%. Additionally, the European Central Bank left its benchmark interest rate at 1%, while the Bank of England left its own at 0.5%.
Although the market did gap higher based on the premarket buying, it struggled to hold onto those gains early in the session. A shift in momentum ahead of the open led to a trigger for a short soon after the opening bell. A continuation pattern followed on the downside on the 5 minute time frame at 10:30 a.m. ET and the market remained weak throughout the morning. The indices found support going into the 12:00 ET correction period, but the "V" bottom favored a trading range into the afternoon. A nice PhoenixTM buy setups took place out of the 13:00 ET correction period to continue the noon reversal, but the pace shifted and the market pulled lower once again into 14:30 ET with a retest of the zone of the mid-day lows. Another reversal took place at that point and two more waves of buying took the indices back into the zone from the day's highs. The Dow led the way.
The Dow Jones Industrial Average ($DJI) ended the session on Thursday at 10,138.99 with a gain of 120.71 points, or 1.20%. Only one of the 30 Dow components posted a loss. Intel (INTC) closed lower on the session by 0.20% after giving up its opening gains early on the day and failing to completely recover them into the close. Amongst the Dow's top performers, 4 posted gains over 2%. These included DuPont (DD) (+2.95%), McDonalds (MCD) (+2.54%), American Express (AXP) (+2.36%), Boeing (BA) (+2.26%).
The S&P 500 ($SPX) rose 9.98 points, or 0.94%, and closed at 1,070.25. Retailers were amongst the session's best and worst performers as a result of the latest same-store sales data. Overall same-store sales at U.S. retailers rose 3.1%, compared to the 3.2% analysts expected. Abercrombie & Fitch (ANF) beat estimates and rose 7.75%, while JC Penney (JCP) rose 6.70%. Gap (GPS), on the other hand, fell -7.61%. Other top performers in the S&P 500 included Anadarko Pete Corp. (APC) (+7.14%) and McGraw Hill (MHP) (+6.57%). H&R Block (HRB) (-8.20%), TJX Cos. (TJX) (-4.55%), and DR Horton (DHI) (-3.92%) were the biggest losers.
The best sectors for the day were materials (+1.5%) and consumer staples (+1.5%). The financials and tech shares were the weakest of the 10 industry sectors. Gold was also weak, which affected stocks such as Barrick Gold Corp. (ABX), but crude oil futures posted a gain of 1.9% and ended the session at $75.44 a barrel.
The Nasdaq Composite ($COMPX) ended the session higher by 15.93 points, or 0.74%, and it closed at 2,175.40 on Thursday. Priceline (PCLN) was the top gainer in the Nasdaq-100. It closed higher by 4.48%. Virgin Media (VMED) (+4.01%), Foster Wheeler (FWLT) (+3.34%) and Qiagen (QGEN) (+2.82%) followed. Nvidia (NVDA) (-3.01%), Ross Stores (ROST) (-2.38%), and Lam Research (LRCX) (-2.34%) were the Nasdaq-100's biggest losers.
My bias is once again unchanged from yesterday. So far we have seen very nice follow through on the reversal action off the support we were looking at heading into this shortened trading week. I am expecting the market to continue to favor corrective action off last week's lows and force the bears to take a time out. Although intraday corrections, such as Thursday's trading range, will be normal. I suspect that we will at least see a move back to the 50 day moving averages in the indices before another swing takes place on the daily time frame.
Note: Unless otherwise stated, the index action described in this article relates to the E-mini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.
Toni Hansen is president and co-founder of the Bastiat Group, Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.