Third Push Higher Underway on 30 Minute Charts
Good day! This is a busy week on the economic data front. On Tuesday the report that had the most impact on the day was the Conference Board's consumer confidence index, which fell from a revised 72.0 in February to 63.4 in March. Even though this was the largest drop in over a year, it served as the catalyst to reverse the premarket weakness we had seen following Monday's close.
As I was writing yesterday's column, the market was still stuck early in the congestive phase following a strong late-day selloff into the closing bell. Despite a rapid bounce into the early-morning hours, the potential was still high that an inverted-V could form that would lead the index futures back to lows.
A slow reaction to those lows would then have led to further selling into Tuesday or Wednesday. As I noted, however, a shift in the momentum into that low would shift the outcome and this is what ended up developing. The overall pace of the move off 3:00 a.m. ET highs began strongly, but slowed as it reached previous lows. Despite rapid bursts of selling on a five-minute time frame, the overall channel for the selloff was slower than the previous uptrend channel out of midnight.
Dow Jones Industrial Average
Within minutes of the release of the stronger-than-expected consumer confidence data, the indices were breaking through the highs of the premarket downtrend channel. This negated the potential for an easy continuation of Monday's weakness and confirmed the bias from late last week that favored another push higher on the 30 minute charts that had weakened as a result of the rounded highs into Monday evening.
This latest break higher will be the third push to the upside on the 30-60 minute charts, so we should expect a larger daily correction to begin before the end of the week. The Dow continues to have the potential for a slightly higher high on the daily time frame before such a correction, whereas the Nasdaq will be unlikely to break those highs before it pulls back once again. Intraday on Wednesday we should also expect a bit of difficult with the rally. The stronger momentum off Tuesday's lows will slow the pace in today's session and create a choppier trading environment overall, particularly on the upside.