Good day! It's been a rough week on Wall Street, so hopefully my usual greeting is still met with a happy reply! All 10 of the S&P 500's industry groups took a hit on Thursday as the market extended its correction off last week's highs. Wednesday wound to a close with the market reacting to support on the 15 minute time frame, but after the initial reaction played out, the attempt at a continuation afterhours was met with steep resistance.
The index futures based into Wednesday's closing bell and for several hours afterwards, but the upside breakout in the late evening hours failed to generate strong interest. Instead, the indices crept higher as they hugged support until between 3-4 a.m. ET. This is when the S&P 500 (ES) and Dow (YM) futures struck their 15 minute 200 period moving averages and these resistance levels held extremely well. The gradual momentum on the rally into them helped the futures market turn sharply lower into the early morning as selling hit overseas.
Dow Jones Industrial Average (Figure 1)
In the meantime, the euro fell strongly against the dollar and a week of congestion at highs gave way to an incredibly strong session for the U.S. dollar. The rally in the dollar was not welcome news for everyone though. Silver, gold, and even oil were hit hard. Corrections which began off record highs earlier in the week gave way to complete panic in Thursday's session.
Oil alone wiped out the remainder of its gains from the past two months despite hitting a new high for the year on Monday. Thursday's lows in the United States Oil Fund (USO) corresponded with the 61.8% fibonacci retracement level from the move off this year's highs and back to the year's lows, which hit in mid-February. Crude oil prices even broke below the $100 a barrel level and settled at $99.73. This bring the monthly loss to 12.46%.
Gold was lower by nearly 3% on Thursday and settled at $1,481.40 an ounce, which was under the psychologically key level of $1,500. Meanwhile, silver was off more than 27% for the week when it settled at $33.72 an ounce.
S&P 500 (Figure 2)
Although the selling was well under way by the time the morning's economic data hit on Thursday, the latest unemployment numbers did nothing to relieve worried investors. Last week's jobless claims rose unexpectedly to a seasonally adjusted 474,000. This was 43,000 higher than the week before. The main event, however, remains on the horizon. On Friday morning the non-farm payrolls data will hit the wires. Unemployment is expected to remain steady at 8.9%, but everyone seems braced for bad news. Due to the rapid downside action on the 15 minute time frame in the indices, there is further room for the market to move lower, although we should see the free fall in gold and silver start to wane as exhaustion takes hold ahead of the weekend.
The Dow Jones Industrial Average ($DJI) ended the day with a loss of 139.41 points, or 1.1%, and closed at 12,584.17 on Thursday. Only three of the Dow's thirty index components posted a gain, and the gains were fractional. The leaders were Intel (INTC) (+0.47%), Disney (DIS) (+0.16%), and Cisco Systems (CSCO) (+0.06%). The weakest performers were Alcoa (AA) (-2.63%), Exxon Mobil (XOM) (-2.58%), Chevron (CVX) (-1.97%), and General Electric (GE) (-1.83%).
Although the Dow Jones Ind. Average had a very difficult session, the same was not true for the Dow Jones Transportation Average. Falling oil prices were met with excitement in the airlines in particular. AMR Corp. (AMR) rose 7,.48%, while Delta Air Lines (DAL) ended the session higher by 7.16%, and United (UAL) rose 5.74%.
Nasdaq Composite (Figure 3)
The S&P 500 ($SPX) fell 12.22 points, or 0.91%, and closed at 1,335.10. The strongest percentage performers were Electronic Arts (ERTS) (+8.84%), Novellus (NVLS) (+7.59%), Ross Stores (ROSS) (+6.94%), and JDS Uniphase (JDSU) (+6.90%). The weakest were Vulcan Materials (VMC) (-6.38%), Murphy Oil Corp. (MUR) (-6.38%), Avon (AVP) (-5.31%), and Joy Global (JOYG) (-5.31%).
The Nasdaq Composite ($COMPX) ended the session lower by 13.51 points, or 0.48%, on Thursday and it closed at 2,814.72. BMC Software (BMC) (+8.84%), Verisign (VRSN) (+3.53%), and Akamai Tech. (AKAM) (+2.39%) followed Electronic Arts (ERTS) (+8.84%) and Ross Stores (ROSS) (+6.94%) as the leaders in the Nasdaq-100. Joy Global (JOYG) (-5.31%), Vertex Pharmaceuticals (VRTX) (-3.83%), Celgene Corp. (CELG) (-3.45%), and Broadcom (BRCM) (-2.90%) were the weakest performers in the index.
Earnings reports to keep an eye on throughout the remainder of this week are Washington Post (WPO) and Weight Watchers (WTW) on Friday.
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.