WEDNESDAY'S MARKET WRAP-UP
Market Snapshot for October 5, 2011 (8:45 p.m. ET):
Closing Prices: DOW 10,939.95 (+131.24, +1.21%), S&P 500 1,144.03 (+20.08, +1.79%), NASDAQ 2,460.51 (+55.69, +2.32%), Nikkei 225 8,530.63 (+147.65, +1.76), DAX 5,473.90 (+256.32, +4.91%), FTSE 5,102.17 (+157.73, +3.19%)
OIL 79.58, GOLD 1,638.50, SILVER 30.35
EURO 1.334, YEN 76.74, BRITISH POUND 1.5468, U.S. DOLLAR INDEX 79.425
Market Rallies 4% Off Lows
The market continued its recovery efforts in Wednesday's session after breaking to new yearly lows earlier the previous day. This flush came after a week of selling that ended with a shift in the momentum of that selling on Tuesday morning and a strong afternoon rally into Tuesday's closing bell. When the market turns so quickly, however, it tends to have a difficult time sustaining that momentum and this is what we've seen in the index futures since then.
The futures congested afterhours on Tuesday evening and continued their range-bound trade into the early morning on Wednesday. A break higher came shortly after 6:00 a.m. ET, before the latest economic data hit the wires in the U.S. Although the original attempt to push higher had similar momentum as the prior afternoon, it was unable to sustain the pace and pulled back gradually into the opening bell. This created an upside continuation pattern that triggered out of 10:00 a.m. ET.
Dow Jones Industrial Average
Jobs Data to Take Center Stage
The premarket ADP employment change report had little effect upon price action despite beating most estimates. It showed that private payrolls were up 91,000 last month. Most analysts had expected somewhere between a 45,000-70,000 increase. This marks the first of the employment data for the week, but the most widely anticipated data is due out on Friday with September's non-farm payrolls and the latest unemployment rate. Analysts are looking for a 90,000 increase in September. The unemployment rate is expected to remain unchanged at 9.1% with very little net gain in the real employment data.
Another Triple Digit Gain
Materials and energy stocks were among the best performers on Wednesday with respective gains of 4.2% and 3.3%. The market climbed steadily throughout the session with the Dow Jones Industrial Average ($DJI) logging another triple digit gain. The 15 minute 20 period moving average served as a guide for support in the Dow and S&P 500 ($SPX) throughout most of the session.
A modest two-wave correction on the five minute time frame took place mid-day coming out of the 11:00 a.m. ET correction period into nearly 13:00 ET. This offered a great opportunity for market participants to catch the afternoon buying with strong intraday setups in numerous issues. The light volume that took place as the market pulled back helped support further afternoon upside. The slower pace of the correction compared to earlier buying was another indication of underlying strength, albeit still modest in comparison to Tuesday afternoon. The session ended just shy of the day's highs.
The Dow Jones Industrial Average ($DJI) ended the day on Wednesday with a gain of 131.24 points, or 1.21%, and closed at 10,939.95. Twenty-six of the Dow's thirty index components posted a gain. The top performers were Disney (DIS) (+5.52%), Cisco Systems (CSCO) (+3.72%), Hewlett Packard (HPQ) (+3.65%), and Chevron (CVX) (+3.48%). The top decliners were McDonalds (MCD) (-0.75%) and Wal-Mart (WMT) (-0.43%).
The S&P 500 ($SPX) finished the session with a gain of 20.08 points, or 1.79%, and closed at 1,144.03. The top percentage performers in the index were Tesoro Corp. (TSO) (+13.79%), Alpha Natural Resources (ANR) (+12.96%), Yahoo (YHOO) (+10.10%), and Micron Tech. (MU) (+9.51%). The top percentage decliners for the day were Sears Holdings (SHLD) (-3.21%), Bank of New York (BK) (-2.87%), and Yum Brands (YUM) (-2.67%).
The Nasdaq Composite ($COMPX) ended the session higher by 55.69 points, or 2.32%, on Wednesday and it closed at 2,460.51. The strongest performers in the Nasdaq-100 ($NDX) were Research In Motion (RIMM) (+12.38%), Yahoo (YHOO) (+10.10%), and Micron Tech. (MU) (+9.51%). The top percentage decliners were Sears Holdings (SHLD) (-3.21%), Costco (COST) (-1.71%), and Qiagen (QGEN) (-1.43%).
Following Wednesday's closing bell the market once again fell into a trading range afterhours. The index futures congested into the early morning hours on Thursday before offering a third push to the upside on the 15 minute time frame. The initial trigger came out of 2:00 a.m. ET, but continued around 3:30 a.m. Although Wednesday morning's breakout was slower than Tuesday's rally, the push higher into Thursday morning was even more gradual. This change in momentum will make continued upside more difficult ahead of Friday's employment data. We are not likely to experience as strong of a trend day on Thursday, but the 20-day moving averages are also helping serve as resistance following this rally and it's common to see at least intraday reactions to that technical level.
The European Central Bank held its rates meeting on Thursday. Recent speculation suggested that the bank could cut rates once again, but sentiment had once again shifted in favor of them holding steady and both the Bank of England and the European Central Bank left their rates unchanged at 0.50% and 1.50%, respectively. The Bank of England, however, announced a 75 billion pound increase in its asset purchase plan, bringing its total to 275 billion.
In other news, Apple (AAPL) shares were lower in premarket trade following the death of founder Steve Jobs. The news of his passing after a long battle with pancreatic cancer hit the wire early Wednesday evening.
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.