Good day! The S&P 500 and Dow Jones Industrial Average both posted their strongest September gains in nearly 3/4 of a century last month. They held onto their bias in favor of another new higher high thanks to strong economic data on Thursday, but it was a slow start. When I wrote Thursday's column the index futures were still showing weakness. In fact, they were basing at afterhours lows and favored further selling, which went against the larger daily bias that we've been following. This bearish bias did end up playing out in the early morning hours with a break lower followed by three waves of downside on a 5 minute time frame before the breakdown trend exhausted itself with a third push lower heading into 2:00 a.m. ET.
Dow Jones Industrial Average
At 2:00 a.m. ET the index futures were not only extended in terms of trend development, but also price. The futures market was testing lows from the previous day, which served as a strong support zone. This zone held and a rather rapid recovery followed. The market returned to afterhours highs before stalling at that resistance zone and falling into a longer trading range once again. This was an upper level range (and hence bullish) in the premarket and consisted to two waves of correction into the 8:30 a.m. ET economic data.
The momentum bias within the range itself was also in favor of the bulls. Well-received economic data merely sealed the deal. The Labor Department reported that applications for jobless claims fell by 16,000 last week, which was more than expected, and hit 453,000. Additionally, the second-quarter gross domestic product (GDP) was slightly higher than earlier estimates and came in at 1.7%. The Chicago PMI, which gauges the regional economy, rose to 60.4 in September, up from 56.7 in August. Readings over 50 indicate expansion.