Good day! Friday was a difficult day for the markets. The session was plagued with choppy intraday trading action and the bulls and bears were split with technology shares weighing heavily on the Nasdaq-100. Meanwhile, General Electric (GE) provided substantial strength for the Dow Jones Ind. Average ($DJI). It hit 52-week highs with an intraday gain of 7.11% and pulled the Dow to its highest level intraday since June, 2008 after reporting better-than-expected earnings with profits of 36 center a share and revenue of $41.1 billion.
Dow Jones Industrial Average (Figure 1)
The indices had two solid waves of upside on Thursday afternoon that returned them to intraday highs and wiped out most, if not all, of the morning losses by the end of the session. In the last hour of trade they pulled back and hit the 15 minute 20 period moving averages just prior to the closing bell. This level served as support and a location that left the market open to a reaction afterhours.
On the all-sessions time frame the index futures fell into a trading range whereby prices swung back and forth between the afternoon highs and the price zone of the closing lows until early morning. The momentum shifted within this trading range to favor a break higher in premarket trade. The final premarket low of the range on Friday morning was at the 3:00 a.m. correction period and by 4:00 a.m. ET the indices were starting to break higher out of a 5 minute PhoenixTM that formed at the end of the range.
The pattern I call a PhoenixTM is a buy setup that quickly returned the index futures to the upper end of the trading range heading into 6:00 a.m. ET in the S&P 500 and Dow Jones Ind. Ave. futures. At this time, the weaker Nasdaq was hitting previous highs. After a brief pause, the new uptrend continued into 8:00 a.m. ET where it once again struck price resistance. The two waves of premarket upside were comparable to the two waves off Thursday afternoon lows.