Good day! Tuesday was a rough day for the indices. The market was hit with one of the strongest selloffs in months and this kept the indices stuck in a larger trading range on the 60 minute time frame after initially beginning a larger daily correction the week before. The index futures did hit price support as they neared the end of the session on Tuesday, however, and momentum shifted into afterhours trade as the day's selloff neared an end.
The S&P 500 index futures hit slightly lower lows afterhours on Tuesday, which created a 2B reversal late into the evening around 21:30 ET. This reversal off support continued with a low PhoenixTM that triggered at about the same time as the 2:00 a.m. ET correction period on Wednesday morning. Meanwhile, the Nasdaq-100 futures formed a series of three slightly lower lows beginning with the first low mid-afternoon on Tuesday. The third low in this Momentum ReversalTM pattern hit at 21:30 ET and it was also followed by a shallow PhoenixTM buy setup into 2:00 a.m. the next morning.
Dow Jones Industrial Average (Figure 1)
The afterhours action on Tuesday and early morning price action on Wednesday favored a larger correction off Tuesday's lows holding into Wednesday's regular trading session. The Nasdaq had the strongest recovery before hitting intraday resistance at the 11:00 a.m. ET correction period. By that point it had recovered more than 50% of the previous day's losses that had occurred between 4:00 a.m. ET and 21:30 ET on Tuesday. The S&P 500 and Dow Jones Ind. Average were weaker, but they also held resistance into 11:00 a.m. ET on Wednesday. They each recovered to approximately the 38.2% Fibonacci retracement level before falling back and spent the remainder of the session in a range. This daily congestion could easily hold throughout Thursday.
Currently the bias for a break of the daily trading range is to the downside with the Dow's 50 day sma and Nasdaq's 100 day sma as support zones.
Wednesday's economic reports had little impact on the day's price action.
Applications for U.S. home mortgages fell 6.5% last week, although the data was not adjusted for the Presidents Day holiday this past Monday. Refinancing applications decreased 6.5%, while the gauge for loans on new home purchases was down 6.1%.
The most highly anticipated jobs data isn't due out until Friday from the Labor Department, but the ADP National Employment Report released on Wednesday morning showed that employment increased by 217,000 in February and January's report was revised to show a 189,000 gain. Friday's report is expected to show a gain of approximately 185,000 in nonfarm payrolls in February, but with the national unemployment rate ticking higher from 9% to 9.1%.
In the afternoon, the Federal Reserve's Beige Book report showed that retailers in each of the Fed's twelve districts are increasing prices to compensate for rising commodity prices, but that there is still "moderate" economic growth.
S&P 500 (Figure 2)
A lot of the day's action on Wednesday came from the commodities. They have been in focus a great deal in recent years, but turmoil abroad and ongoing uncertainty over the domestic economy has again focused investors' eyes on crude oil and gold. Both continued to push higher into Wednesday. Gold has been testing record, while oil rose over $102 a barrel. This has pushed prices up at the pump as well. Gas prices in some areas are already pushing through $4 a gallon.