Commodity prices stabilized further in Wednesday's session after sharp selling earlier this month brought gold, silver, and oil crashing into support two weeks ago. Gold rose 1% to $1,495.60 an ounce, while silver settled higher by 4.8% at $35.09 an ounce. Crude oil was up 3.3% on Wednesday to $100.10 a barrel after the weekly oil inventory report showed lower-than-expected U.S. crude oil supplies.
The rest of the market continued its trend of trading roughly in sync with the commodities, although without the extremes. The indexes were lower in premarket trade, but held the daily support at 50- and 100-day moving averages in the major indices following a 2-wave correction off highs on the daily time frame. The open was spent shifting the premarket momentum and by 10:30 a.m. ET the bulls had a firm grasp and kicked off a second wave of buying following Tuesday's mid-day lows off the daily support.
Dow Jones Industrial Average
All of the setups intraday in the indices were on the buy side. The trend remained strong, albeit somewhat choppy, throughout the day. It wasn't until the 14:00 ET correction period that we started to see the market begin to falter. By that point the index futures were striking strong price resistance at previous highs, congestion, and even equal move resistance levels. The equal move resistance can be seen clearly on the 15 minute charts in blue. Since the pace of Wednesday's rally was comparable to Tuesday's, that type of resistance held extremely well.
Despite the afternoon resistance, the bulls still held onto the gains afterhours with only slight price correction in the early-morning hours on Thursday. This congestion along highs sets the tone for the third breakout higher into Thursday morning. The highs from May 15th are the next major Dow (YM - 12,600 zone) resistance intraday, while the highs from the 13th are the next resistance in the S&P 500 (ES -1350 zone).
Wednesday's top economic news came from the Fed. The U.S. Federal Reserve released its policy meeting minutes from last month's meeting which outlined discussions on tightening their monetary policy once the economy shows further improvement. The news had little impact on the day's price action other than creating a more solid test of the 15 minute resistance.
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 80.60 points, or 0.65%, and closed at 12,560.18 on Wednesday. Twenty-three of the Dow's thirty index components posted a gain. The top performers were Caterpillar (CAT) (+3.11%), Chevron (CVX) (+2.44%), DuPont (DD) (+1.89%), and Exxon Mobil (XOM) (+1.65%). The weakest performers were Hewlett-Packard (HPQ) (-1.14%), Bank of America (BAC) (-0.92%), and WalMart (WMT) (-0.65%).
The S&P 500 ($SPX) rose 11.70 points, or 0.88%, and closed at 1,340.68. The top percentage performers in the index on Wednesday were Analog Devices (ADI) (+5.89%), Dell (DELL) (+5.35%), Newfield Expl. (NFX) (+5.16%), and Interpublic Group (IPG) (+5.02%). Staples (SPLS) was a shocking disappointment and led the decliners with a loss of 15.37% after it reported disappointing same-store sales and a weaker-than-expected profit. Other top decliners included Aflac (AFL) (-6.31%), Hershey (HSY) (-2.80%), and Urban Outfitters (URBN) (-1.91%).
Target (TGT) also reported earnings on Wednesday that fell short of expectations. Despite topping earnings estimates, sales were weaker-than-anticipated and TGT fell 1.61%. Hershey's shares (HSY) were lower following the announcement of the upcoming departure of their CEO, who will be taking over the position at Del Monte Foods. Dell (DELL) was one of the day's highlights. It's shares finished higher by 5.35% following better-than-expected earnings results and a slew of broker upgrades.
The Nasdaq Composite ($COMPX) ended the session higher by 31.79 points, or 1.14%, on Wednesday and it closed at 2,815.00. The top performers in the Nasdaq-100 were Dell (DELL) (+5.35%), F5 Networks (FFIV) (+4.51%), Expedia (EXPE) (+4.23%), and Cerner Corp. (CERN) (+4.17%). The weakest were Staples (SPLS) (-15.37%), Ctrip (CTRP) (-1.99%), Vertex Pharmaceuticals (VRTX) (-1.93%), and Urban Outfitters (URBN) (-1.91%).
Economic reports to keep an eye on later this week will include Thursday's jobless claims, Philadelphia Federal Reserve survey, and Leading Indicators Index.
Earnings reports to watch out for Salesforce.com (CRM) Thursday afternoon, and Yingli Green Energy (YGE) Friday morning.
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.