THURSDAY'S MARKET WRAP-UP
Good day! Most of the focus for the market over this past week has been on developments in Greece. On Thursday Greece's parliament passed an implementation plan for its five-year austerity plan, which was approved the day before. The market has been viewing this in a very positive light and it's created a much stronger recovery off the month's lows than I had anticipated based purely on the technicals.
Dow Jones Industrial Average (Figure 1)
Thursday's economic data also helped provide the market with another boost. The Chicago Purchasing Managers index rose from 56.6 in May to 61.1 in June, which was sharply higher than the 54 level analysts had been anticipating. This level of increased manufacturing activity in the Midwest was welcome news in this economy where talks of a double-dip recession are still widespread. On that note, the Federal Reserve's second round of quantitative easing (QE2) came to an end on Thursday. Another similar measure is unlikely.
Not all news was good news though. According to the Labor Department, initial jobless claims, while lower last week by 1,000 at 428,000, were still higher than the 420,000 economist were expecting. This news did little to faze the bulls.
As I mentioned in yesterday's column, the 50 and 100-day moving averages were strong magnets for price action in the indices still ahead of the open. All three of the major indices hit these moving averages very quickly on Thursday morning following the opening bell after the index futures broke sharply higher out of yet another narrow premarket trading range.
I had initially anticipated greater intraday swings as this level hit, but the momentum of the upside move erased a lot of the potential for the remainder of the session. Stronger-than-average price swings rarely correct quickly unless the pace of the buying slows and rounds off at highs. In order be substantial enough on the 60-minute charts, this would take more than the time left in the session and the result was another period of congestion with very narrow price moves into the close.