Good day! The market has been in "pause mode" for a couple of days after strong buying into the new week, but the bullish bias on the 60-minute charts remained intact despite continued selling into Tuesday's close. The market rallied for three days into the Dow Jones Ind. Ave. and S&P 500's 20 day moving averages, making it difficult for the rally to continue without pausing to catch its breath. This has led us to favor a correction from the rally for a couple of days, but without any strong bearish bias past the short-term due to the strength of the rally just several days earlier.
Dow Jones Industrial Average (Figure 1)
On Wednesday we continued to see this struggle play out. The index futures were lower heading into the early-morning hours, but popped suddenly after 5:00 a.m. ET. The rally took the futures sharply higher, but didn't last. By 7:00 a.m. ET the futures were rounding off and beginning a steep decline that continued past Wednesday's opening bell and into 10:00 a.m. ET.
Japan's recovery efforts and the turmoil in North Africa and the Middle East have remained the center of attention and commodity prices continued to rise. Gold even struck a new record high and settled at $1,438 an ounce, while silver closed at $37.20 an ounce. This was its highest close in more then 30 years.
With the larger daily strength still in mind, the market did manage to hold morning lows and a recovery was soon underway. The pace was very comparable to the selloff heading into the opening bell. The trend, however, was more orderly. While the premarket selloff came in two waves with a lot of overlap in the middle, the recovery intraday took place with a number of wave of upside whereby each correction was a slow, gradual pullback into the 5 minute 20 sma support. This made it easier to time and allowed for tighter stop placement for daytraders taking advantage of the trend. The indices managed to return to prior 15 minute highs before finally holding highs into the final 30 minutes of trade. Congestion continued afterhours with the index futures hugging the highs of the 60-minute range into midnight. This type of action remains favorable for the bulls this week.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) had a gain of 67.39 points, or 0.156%, and closed at 12,086.02 on Wednesday. Twenty-three of the Dow's thirty index components posted a gain on the day. The top performers were Alcoa (AA) (+3.04%), Disney (DIS) (+1.93%), 3M (MMM) (+1.59%), and United Technologies (UTX) (+1.21%). The weakest performer was Bank of America, which fell 1.66% after the Federal Reserve denied its request to increase its dividends. It was followed by losses in WalMart (WMT) (-0.69%) and DuPont (DD) (-0.39%).