WEDNESDAY'S MARKET WRAP-UP
Good day fellow traders!!! The market had another promising start to the day on Wednesday with a breakout in early morning trade to new highs for the month following a continued focus on Greece's austerity measures. Greece's parliament approved the plan aimed at avoiding debt default and this brought cheer to European and American markets heading into Wednesday's session. On Thursday Greece's parliament will focus on the implementation measures for their plan.
By the time the opening bell rang in New York, however, the index futures were extended and already dealing with premarket resistance levels that led to a price pullback off premarket highs. This correction continued past the opening bell and into the 10:00 a.m. ET housing data.
Wednesday's housing data began prior to the open. The Mortgage Bankers Association reported that its seasonally adjusted index of mortgage application activity fell 2.7% last week. Pending home sales, on the other hand, were up. According to the National Association of Realtors, their Pending Home Sales Index rose 8.2% in May to 88.8. The West and Midwest experienced the strongest increases. It is typical to see these regions gain strength heading into summer, but there continues to be a large inventory of unsold homes on the market.
Dow Jones Industrial Average (Figure 1)
Although the market flushed lower out of 10:00 a.m. ET, this continued selling brought the indices back into the congestion zone from afterhours trade on Tuesday evening. This level served as a strong support level and prices turned higher. The indices retested premarket highs between 11 and 11:15 ET, creating a slowdown in upside momentum mid-day.
As proposed in yesterday's column, the market had a difficult time continuing higher into the afternoon. The Nasdaq even attempted a breakout from the 13:00 ET correction period, but the move quickly failed and the stronger Momentum Reversals in the Dow and S&P 500 took over, leading to a strong pullback into mid-afternoon. Even though the market attempted to recover these losses in the final hour of trade, it was unable to break the mid-day highs.