Equity indexes find support

The Bleeding Slows as Market Begins to React to Daily Support

Good day! Wednesday was a choppy session for the market with most of the setups in play forming on the five-minute time frames as anticipated. The bulls continued to struggle, but the daily support we've seen coming in after last week's sharp selloff has continued to hold. The Nasdaq shows this exhaustion the most clearly in the form of three waves of selling on the 60-minute time frame. I've detailed these waves on the daily Nasdaq chart by circling the congestion periods between each wave in blue.

Dow Jones Industrial Average

Although exhaustion is clearly the market's mode heading into Thursday, the bears are still showing the upper hand with slower upside moves on the five- to 15-minute time frames than when compared to the swings lower. This remains the case heading into Thursday morning as well and it's going to mean a focus on day trade type of action once again throughout the day. Strong follow-through for new swing trades (multi-day holds) in either direction will be more difficult to achieve.

The Dow Jones Industrial Average ($DJI) ended the day with a loss of 21.87 points, or 0.18%, and closed at 12,048.94 on Wednesday. Twelve of the Dow's thirty index components posted a gain. The top performers were Verizon (VZ) (+1.47%), Johnson & Johnson (JNJ) (+0.98%), Exxon Mobil (XOM) (+0.95%), and Merck (MRK) (+0.62%). The weakest were Caterpillar (CAT) (-1.84%), Alcoa (AA) (-1.78%), American Express (AXP) (-1.62%), and Cicso Systems (CSCO) (-1.35%).

The Nasdaq Composite ($COMPX) ended the session lower by 26.18 point, or 0.97%, on Wednesday and it closed at 2,675.38. eBay (EBAY) (+2.17%), Alexion Pharmaceuticals (ALXN) (+1.04%), Expedia (EXPE) (+0.97%), and Illumina (ILMN) (+0.77%) were the top performers in the Nasdaq-100. The weakest were Micron Technology (MU) (-5.03%), Whole Foods (WFM) (-4.47%), Altera (ALTR) (-3.84%), and Akamai Technologies (AKAM) (-3.54%).

The economic data coming out is still less-than-desirable and will weigh on the market over time, but we should start to see the market break its daily losing streak by this weekend. The Nasdaq-100 had been holding its 15 minute 20 sma zone since June 1 and that resistance level should also break before week's end. Losing streaks of this magnitude are rare. The last one in the Dow took place in July 2010, while the last in the S&P 500 was February 2009.

Wednesday's release by the Fed of the latest Beige Book, which discusses economic conditions throughout the central bank's twelve districts, shows moderate growth, but little acceleration.

In early-Thursday data, those filing for first-time unemployment claims rose 1,000 in America last week to 427,000. A drop had been anticipated. The U.S. trade deficit, however, narrowed unexpectedly to $43.7 billion in April. The reaction was mixed.

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.