Although Wednesday's morning rally lasted for over an hour, it was not a significantly strong momentum move and began to falter at 10:35 a.m. ET. By 11:00 a.m. ET the morning channel was beginning to break and selling began in earnest shortly thereafter.
An even stronger continuation to the reversal off the morning highs triggered at noon. This continuation was brief, however, and the index futures held 15 minute 20 period moving average support intraday and climbed up that support level into the closing bell before finally giving way to further weakness afterhours.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) had a gain of 61.53 points, or 0.5%, and closed at 12,288.17 on Wednesday. Twenty-three of the Dow's thirty index components posted a gain. The strongest performers were JP Morgan Chase (JPM) (+2.39%), Hewlett-Packard (HPQ) (+2.08%), Boeing (BA) (+1.51%), and American Express (AXP) (+1.45%). Verizon Communications (VZ) (-0.80%), Wal-Mart (WMT) (-0.73%), and Cisco (CSCO) (-0.48%) were the weakest.
The S&P 500 ($SPX) rose 8.31 points, or 0.63%, and closed at 1,336.32. The strongest stock in the S&P 500 was Family Dollar (FDO) (+21.13%) after investor Nelson Peltz filed to buy the company. Dell (DELL) (+11.86%) was the second-strongest performer. Abercrombie & Fitch (ANF) (+7.58%) and Dean Foods (DF) (+6.64%) were other top gainers. The weakest were NYSE Euronext (NYX) (-3.67%), Expedia (EXPE) (-2.40%), Devon Energy Corp. (DVN) (-2.13%), and Allegheny Energy (AYE) (-2.05%).
The Nasdaq Composite ($COMPX) ended the session higher by 21.21 points, or 0.76%, on Wednesday and it closed at 2,825.56. Research In Motion (RIMM) (+4.67%), Comcast Corp. (CMCSA) (+4.01%), and NVIDIA (NVDA) (+3.68%) followed Dell (DELL) (+11.86%) as the Nasdaq-100's top percentage performers. Comcast's (CMCSA) earnings also beat expectations. The weakest performers in the index were Expedia (EXPE) (-2.40%), Seagate Technology (STX) (-2.39%), and Ctrip (CTRP) (-2.15%).
Thursday will be a somewhat busy day for data. The weekly jobless claims are due out in the morning, as well as the Consumer Price Index. Then watch for January's leading indicators at 10:00 a.m. ET, along with the Philadelphia Fed survey.
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.