Stock indexes still focused on economic woes

WEDNESDAY'S MARKET WRAP-UP

Market Snapshot for September 28, 2011 (10:14 pm ET):

• Closing Prices: DOW 11,010.90 (-179.79, -1.61%),S&P 500 1,151.06 (-24.32, -2.07%), NASDAQ 2,491.58 (-55.25, -2.17%), Nikkei 225 8,531.02 (-84.63, -0.98), DAX 5,578.42 (-50.02, -0.89%), FTSE 5,217.63 (-76.42, -1.44%)
• OIL 80.58, GOLD 1,607.70, SILVER 30.21
• EURO 1.3556, YEN 76.53, BRITISH POUND 1.5582, U.S. DOLLAR INDEX 78.60

Buyer Beware Indeed!

Despite strong gains, Tuesday was a difficult day for the bulls. It was the third straight day of upside, but the majority of the gains took place in premarket trade and the pace of the buying was slower than earlier selloffs and even the previous day's upswings. This allowed the market to rapidly move lower once the uptrend channel gave way, so despite establishing a triple point gain in the Dow Jones Industrial Average and gains over 1% in the major indices, the bull move was only a positive one for bullish daytraders in theory and the strongest action to catch was the afternoon flush to the downside that I had warned about. That warning continued to be in affect heading into Wednesday's session and with good reason.

The 50-day moving averages served as strong resistance for the S&P 500 and Dow Jones Ind. Average on Tuesday. This was another contributing factor to Tuesday's late-day reversal, but it was also a warning sign for short-term traders. The market had collapsed in early August and upside on the daily time frame since that point had been limited to moves off the lower end of a gradual uptrend channel on the weekly time frame.

THURSDAY'S OUTLOOK

Last week was an attempt from the market to break the lower end of that trend channel, but the fall off the upper end of the channel lent support to prior lows and a total breakdown failed. It is more ideal for the market to hug the lower end of the trading channel before breaking down further in order to establish strong continuation patterns for shorts. Alternately, when a low-level base does reverse and break higher, the market will begin to shift its momentum with slower downside within the range and even moves that hug the upper end of that larger channel. Neither of these things has yet to happen, which leaves the market still stuck within that larger daily channel that has been in play since early August and it means ongoing favor for a continuation of the channel on the 60 minute charts as we move into the end of the week.

Dow Jones Industrial Average

Commodities Outlook Remains Unchanged

The commodities remained at the forefront of market news on Wednesday. Tuesday's relief rally on light volume gave way to selling once again which wiped out all of the earlier recovery. As I mentioned yesterday, the 200 day moving average in gold will be serving as a magnet and gold is easily at risk of being dragged down into that zone and price support from early summer. We should not experience a repeat of last week's selloff on any continuation move, however, and greater overlap in price action from one day to the next can be expected.

Gold settled at $1,618.10 an ounce in New York on Wednesday with a loss of $34.40. Silver settled lower at $30.134 an ounce. Crude oil settled lower by $3.24 at $81.21 a barrel.

S&P 500