Good day! The market broke its 6-day losing streak on Thursday with a reaction off the daily support zone we've seen hit over the past several days. Nevertheless, trading was light as the indices crept higher in the afternoon, showing that the bulls are still on edge and not feeling particularly committed to this rebound.
The reaction to the early-morning economic data was mixed. Overseas, the European Central bank kept its key interest rate unchanged at 1.25%, but did not rule out an increase in July. Back in the States, the number of first-time filings for unemployment benefits rose 1,000 last week to 427,000. This was higher than anticipated. Meanwhile, the U.S. trade deficit narrowed unexpectedly to $43.7 billion in April.
Dow Jones Industrial Average (Figure 1)
These premarket releases lead to a bit of whip-lash ahead of the open, but had no lasting impact. The Nasdaq-100 futures had been forming a 2-wave continuation pattern on the short side prior to the data and this technical move continued once the news was absorbed. The continuation lasted for the first 15 minutes of the regular trading session. Both the S&P 500 and Dow Jones Ind. Average futures, on the other hand, continued to trade within premarket congestion while the Nasdaq sold off.
The indices snapped out of their pessimistic mood, at least briefly, following the 9:45 a.m. ET correction period. The bulls began to make their way back into the market in stronger numbers and pushed the indices higher throughout most of the remainder of the session. The upside was the strongest in the first half of the open, remaining so through the 10:00 a.m. ET release of April's U.S. wholesale inventories by the Commerce Department. Inventories rose 0.8% to $447.2 billion, which was less than anticipated. Automotive inventories had the largest impact on this data, falling 1.3%. Sales rose 0.3% to $393.5 billion. Analysts had anticipated a 1.2% increase.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day with a gain of 75.42 points, or 0.63%, and closed at 12,124.36 on Thursday. The strongest performers in the Dow for the day were JP Morgan (JPM) (+1.46%), DuPont (DD) (+1.45%), Chevron (CVX) (+1.28%), and United Technologies (UTX) (+1.26%). The only losers in the index were Verizon (VZ) (-0.64%), Intel (INTC) (-0.27%), WalMart (WMT) (-0.13%), and AT&T (T) (-0.03%).
The S&P 500 ($SPX) gain of 9.44 points, or 0.74%, and closed at 1,289.00. Banking stocks and health care both performed exceptionally well. The strongest percentage performers in the S&P 500 were Interpublic Group (IPG) (+6.44%), Moody Corp. (MCO) (+5.88%), UnitedHealth Group (UNH) (+4.98%), and Cigna Corp. (CI) (+4.49%). The weakest performers were Prologis Inc. (PLD) (-3.06%), Motorola Mobility Hldgs (MMI) (-2.75%), Kimco Realty Corp. (KIM) (-2.43%), and F5 Networks (FFIV) (-1.90%).
Nasdaq Composite (Figure 3)
The Nasdaq Composite ($COMPX) ended the session higher by 9.49 points, or 0.35%, on Thursday and it closed at 2,684.87. The strongest performers in the Nasdaq-100 were Flextronics Intl. (FLEX) (+2.66%), Urban Outfitters (URBN) (+2.46%), Research In Motion (RIMM) (+2.40%), and Sigma Aldrich (SIAL) (+2.36%). The weakest were Vertex Pharmaceuticals (VRTX) (-9.54%), Alexion Pharmaceuticals (ALXN) (-2.91%), F5 Networks (FFIV) (-1.90%), and NVIDIA (NVDA) (-1.14%).
Thursday's gains would have been even larger if the bears hadn't reclaimed the field in the final hour of trade. The rally which began in earnest in the morning was beginning to fade by early afternoon and continued to slow as the final hour of trade approached. Selling hit following the 15:00 ET correction period, aided by the light volume throughout most of the upside. All of the afternoon gains were erased by the close and the selling continued strongly afterhours to thwart the day's recovery efforts even further. Continue to expect difficulty into the weekend as the market remains more in "congestive mode" as anticipated as a reaction to the daily support rather than rally mode.
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.