Good day! Thursday was off to a weak start by the time the opening bell rang. Cisco's earnings had hit a sore spot and commodity prices were still falling. Congestion afterhours on Wednesday evening was broken to the downside in the early hours of Thursday morning and although that trend found support between 6-6:30 a.m. ET, it wasn't until after the opening bell that the indexes were able to start to recover.
Dow Jones Industrial Average (Figure 1)
Thursday's premarket data didn't have much of an impact on immediate price action in the index futures, but no reaction proved to be a good reaction since the market continued to round off at lows at the opening bell approached.
First time unemployment claims fell to 434,000 last week. This was still worse than anticipated and makes the fourth week in a row that initial claims have topped 400k.
April's Producer Price Index for finished goods rose to a seasonally adjusted 0.8%. Meanwhile, retail sales were up 0.5% in April, primarily due to rising food and gas prices.
Thursday's intraday data at 10:00 a.m. ET had a more immediate impact on the market. The indexes had remained weak at the open, but confirmed the 15 minute support and took a more decisive turn to the upside following the Commerce Department's report on business inventories. Inventories in March were up 1%, which was higher than the 0.9% increase analysts' had been anticipating.
S&P 500 (Figure 2)
Commodities joined in the recovery following the 10:00 data. Three solid waves of upside formed on the 5 minute time frame throughout the morning and into mid-afternoon in the indexes as well as in silver, gold, and oil. The 5 minute 20 period moving average was initial resistance and the indexes hugged this zone to create a PhoenixTM buy setup on the 5 minute charts heading into 11:00 a.m. ET. A second correction of similar degree as the first formed between 11:45 a.m. and the 13:00 ET correction period, leading to a third wave of upside that took the market back into price congestion and resistance from the past several trading days (as shown on the 15 minute charts).
When the market has three wave of upside with corrections that are of a comparable length in time, it typically exhausts the trend and makes it more likely that a fourth attempt with fail. We saw this as the indexes attempted slightly higher highs in mid-afternoon, but overall they held the 15 minute resistance and were choppy into the closing bell.
Nasdaq Composite (Figure 3)
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 65.89 points, or 0.52%, and closed at 12,695.92 on Thursday. More than two-thirds of the Dow's thirty index components posted a gain. The leaders were IBM (IBM) (+1.62%), Merck (MRK) (+1.56%), Coca-Cola (KO) (+1.47%), and McDonalds (MCD) (+1.45%). The top decliner was Cisco Systems (CSCO), which fell 4.78% after it reported earnings of 42 cents a share, beating estimates for 37 cents a share. Nevertheless, it warned for the current quarter. Caterpillar (CAT) followed with a loss of 1.23%, while American Express (AXP) (-0.58%) was the third-largest decliner.
The S&P 500 ($SPX) rose 6.57 points, or 0.49%, and closed at 1,348.65. First Solar (FSLR) was the strongest percentage performer in the index with a gain of 6.25%. The other leaders included Symantec (SYMC) (+5.20%), Novellus (NVLS) (+4.69%), and Tyson Foods (TSN) (+4.61%). Cisco (CSCO) (-4.78%) was also the S&P 500's weakest index component, followed by Goldman Sachs (GS) (-3.47%), Tesoro Corp. (TSO) (-3.17%), and Lexmark Intl. (LXK) (-2.18%).
The Nasdaq Composite ($COMPX) ended the session higher by 17.98 points, or 0.63%, on Thursday and it closed at 2,863.04. First Solar (FSLR) (6.25%), Symantec (SYMC) (+5.20%), NVIDIA (NVDA) (+3.17%), and Verisign (VRSN) (+3.15%) were the strongest stocks in the Nasdaq-100. The weakest were Cisco, Seagate Tech. (STX) (-1.38%), Wynn Resorts (WYNN) (-1.21%), and Joy Global (JOYG) (-1.20%).
Kohl's (KSS) and Nordstrom (JWM) are among the earnings announcements to keep an eye on for Thursday. NVIDIA (NVDA) also reports after the close on Thursday.
Additionally, April's consumer price index is out on Friday morning.
Overall the market remains in congestive mode and favor remains with the daytraders since the strong back and forth action from one day to the next can easily flush out those holding multi-day positions