E-mini market gains erode following FOMC minutes

Market Snapshot for October 13, 2011 (1:40 a.m. ET):

  • Closing Prices: DOW 11,518.85 (+102.55, +0.9%), S&P 500 1,207.25 (+11;71, +0.98%), NASDAQ 2,604.73 (+21.70, +0.84%), Nikkei 225 8,819.92 (+81.02, +0.93), DAX 5,994.47 (+129.47, +2.21%), FTSE 5,441.80 (+46.10, +0.85%)
  • OIL 85.88, GOLD 1,678.60, SILVER 32.2415
  • EURO 1.3784, YEN 77.08, BRITISH POUND 1.5733, U.S. DOLLAR INDEX 77.215

Gains Erode Following Fed Minutes

As Tuesday's session wound to a close the market was favoring short-term weakness, which played out afterhours, but my expectations heading into Wednesday were that we could easily see the market shift directions once again. Talk of further bailout plans in Europe, namely Slovakia and Greece, and EU plans aimed at further strengthening banks helped trigger an early-morning rally in the index futures that kicked off around 4:00 a.m. ET. Although the momentum slowed on a continuation move intraday, the rally continued throughout most of Wednesday's session.

Wednesday was a decent day for daytraders. Early congestion on the five minute time frame broke sharply higher out of 10:00 a.m. ET and the rally continued mid-day before the indices struck price resistance at prior daily highs at approximately the same time as the 13:00 ET correction period hit. This early afternoon continuation, however, was weaker than earlier price action, casting doubts upon the market's ability to hold onto the day's gains in late afternoon trade. The Nasdaq, which had weakened considerably in momentum compared to its premarket rally, was particularly vulnerable.

Dow Jones Industrial Average (Figure 1)

At 14:00 ET the minutes from September's Federal Open Market Committee's meeting were released. At that time, the Fed had stated that it saw "considerable uncertainty" for a "pickup in economic growth". The market had not taken the news well and had sold off sharply at the time. The debate on how the Fed can help support further economic recovery efforts has been an ongoing one dating back nearly to when Bernanke took over the reins of Fed Chairman from Greenspan.

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