Good day! Thursday was a bit of a crazy session for the market, or at least in the eyes of many market participants. Prices whipsawed from one extreme to the next throughout most of the day before settling relatively unchanged.
As you may recall from my commentary yesterday, I didn't have a strong bias for a directional move heading into Thursday. The index futures were in mid-range on the 60 minute time frame with comparable momentum each way. The action heading into midnight was bearish, but the daily charts were still not showing strong signs of another imminent selloff. This meant that the best bias was to be willing to just trade the smaller, intraday strategies I spoke of as the day played out. Sticking to this frame of mind was vital for a successful day of trade on Thursday.
Dow Jones Industrial Average (Figure 1)
One of the strongest triggers for price action going into the day came from the premarket jobs data. At 8:30 a.m. ET the Labor Department released its weekly report on new jobless claims, which were down 11,000 to 445,000 last week. Claims had been expected to increase. The index futures jumped on the news. It was the fourth drop in 5 weeks. The overall weekly claims number is down 11% since peaking at 504,000 in mid-August. Friday will bring another slew of employment data from nonfarm payrolls to the unemployment rate.
September's retail sales data also had a strong impact on the market on Thursday. U.S. same-store sales rose 2.8% for the month. This was 0.7% higher than anticipated. This put a number of retailers the top of the day's gainers lists.
Despite the strong premarket action, however, the indices struggled to hold onto those gains heading into the opening bell. The index futures hit resistance just before 9:00 a.m. ET and were already rolling over before the bell. The selloff intensified into 10:00 a.m. ET, but just as quickly as it began, it reversed once again. The indices bounced at 10:00 ET, but this time the reversal was not as long-lasting and the 50% retracement level held in the S&P 500. (The Nasdaq was stronger and did manage a retracement back to opening highs.) The S&P 500 and Dow Jones Ind. Ave. then fell into a trading range as the morning wore on. Volume dropped and the two indices hugged the session's lows before breaking lower.
The stronger Nasdaq fell off highs into the 5 minute 200 sma and then hugged that support level before it gave way to further selling into noon as well. It hit 5 minute equal move support around the same time as it hit the morning lows. This support held, along with the rest of the market, and the market began to turn over once again into the remainder of the afternoon.
S&P 500 (Figure 2)
The afternoon action was not as smooth as the morning's. An initial bounce off lows took the index futures into resistance at their 5 minute 20 period moving averages. They hugged them for just under an hour and then broke higher. This price pattern is one I call a Phoenix™ and typically offers a nice continuation on the upside. That continuation stalled as the Dow and Nasdaq futures hit 5 minute 200 sma resistance around 14:15 ET. Despite a slowdown in the upside momentum at that point, the market continued to hold onto the afternoon uptrend into the close and price action was choppy and less favorable to daytraders than earlier action.
After the close, Alcoa (AA) unofficially kicked off earnings season when it reported earnings of 9 cents a share after the close, beating the Street expectations of 5-6 cents a share. It's revenue was $5.35 billion, up 15% from a year ago and higher than analyst expectations of $4.95 billion.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) posted a loss of 19.07 points, or 0.17%, and closed at 10,948.58 on Thursday. Just over a third of the Dow's 30 index components posted a gain. The top performers were General Electric (GE) (+0.89%), DuPont (DD) (+0.78%), Pfizer (PFE) (+0.70%), and International Business Mach. (IBM) (+0.64%). The biggest losers were Alcoa (AA) (-1.37%), AT&T (T) (-1.29%), Verizon (VZ) (-1.29%), and 3M (MMM) (-1.10%).
The S&P 500 ($SPX) fell 1.91 point, or 0.16%, and closed at 1,158.06. The top gainer in the S&P 500 was Adobe Systems (ADBE) (+11.50%) on a rumor of a bid by Microsoft. JC Penney (JCP) followed thanks to late-day gains after it beat sales expectations. Abercrombie & Fitch (ANF) (+8.91%) came in third after it reported a 13 cent per share rise in sales. It was followed by a 6.73% gain in BMC Software (BMC) on rumors that it was looking to put itself up for sale. Marriott International (MAR) was the biggest loser, falling 5.78%. The second-largest loser was Owens-Illinois (OI) (4.48%). Starwood Hotels & Resorts (HOT) and Pepsico (PEP) both fell 2.95%.
The Nasdaq Composite ($COMPX) ended the session lower by 3.01 points, or 0.13%, on Thursday and it closed at 2,383.67. ADBE and BMC were the top performers in the Nasdaq-100, followed by Seagate Technologies (STX) (+3.31%) and Vertex Pharmaceuticals (VRTX) (+2.51%). The weakest stocks in the Nasdaq-100 were Illumina Inc. (ILMN) (-2.74%), Yahoo (YHOO) (-2.00%), and Intuitive Surgical Inc. (ISRG) (-1.95%).
Note: Unless otherwise stated, the index action described below relates to the EMini 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.