E-mini stock market futures resume recovery

Good day! Volume was light on Thursday compared to the pace of the selloff earlier this month, but the market made strong headway in its recovery efforts. We had started to see the congestion from earlier this week favor a break higher on Wednesday when prices started pulling steadily off the morning lows. By the afternoon the upper end of the 30-minute channel had broken and the indices were pushing against prior 15 minute highs with the Dow Jones Ind. Average leading the way. This breakout continued quite well into Thursday, although the intraday price action was not as strong.

Dow Jones Industrial Average (Figure 1)


At the time I was writing yesterday's column, the index futures were congesting along Wednesday's highs in afterhours trade. This is a strong pro for the bulls since upper-level trading ranges have a tendency to break higher, unless the momentum on the upside within the range is substantially slower than the downside. This was not the case on Wednesday, however, and the futures maintained the bullish bias I've written about throughout the week.

The initial trigger on this afterhours breakout came in the early-morning hours on Thursday with the 4:00 a.m. ET correction period. Although the momentum was slightly less than the rally off Wednesday's lows, it was steady and the index futures hit the pace-adjusted equivalent of an equal move compared to Wednesday's rally at 8:00 a.m. ET Thursday morning. By striking this target level in premarket trade, however, it created a choppier intraday environment that contributed to the lighter volume. Thanks to earnings strength afterhours, however, the S&P 500 index futures were able to hit an equal move on the 15 minute charts with the day's rally as compared to the push higher on the 20th-21st. This leaves the indices extended on the upside once again in the short term into Thursday evening, although the daily charts of the major indices still have more upside potential.

S&P 500 (Figure 2)


The Dow Jones Industrial Average ($DJI) had a gain of 84.54 points, or 0.7%, and closed at 12,170.56 on Thursday. Only three of the Dow's thirty index components posted a loss on the day. The top percentage performers were Hewlett-Packard (HPQ) (+2.45%), Home Depot (HD) (+2.02%), Pfizer (PFE) (+1.91%), and WalMart (WMT) (+1.84%). The losers were Cisco (CSCO) (-1.25%), Bank of America (BAC) (-1.25%), and Chevron Corp. (CVX) (-0.09%).

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