Stock market recovers losses despite mixed data

THURSDAY'S MARKET WRAP-UP

Market Snapshot for January 5, 2011 (10:52 p.m. ET):

Closing Prices: DOW 12,415.70 (-2.72, -0.02%), S&P 500 1,281.06 (+3.76, +0.29%), NASDAQ 2,669.86 (+21.50, +0.81%), Nikkei 225 8,398.66 (-90.05, -1.06%), DAX 6,095.99 (-15.56, -0.25%), FTSE 5,624.26 (-44.19, -0.508%)

OIL 101.43, GOLD 1,626.50, SILVER 29.275

EURO 1.2793, YEN 77.17, BRITISH POUND 1.5504, U.S. DOLLAR INDEX 81.135

Trading Remains Mixed Heading into Friday

The market hasn't offered us much excitement over the course of this shortened holiday trading week so far. Volume has remained relatively light and action has been very mixed with the bulls taking the lead for a few hours before passing the baton to the bears. The index futures were very weak early in premarket trade on Thursday thanks to a return of weakness in Europe, but they began to recover as the opening bell in New York approached. The futures had formed two waves of downside on the 5 minute time frame on the European weakness, but at 7:00 a.m. ET the second and slower wave of selling broke to the upside, triggering a buy setup that was followed by strong upside, thanks in part to the shift in momentum of the selling. By 8:30 a.m. ET the market was back to the levels that were trading prior to Europe's open.

Dow Jones Industrial Average (Figure 1)

The prior highs from early premarket trade served as strong price resistance as the market considered the latest economic data in the States. Claims for new unemployment benefits fell 15,000 last week with initial claims for state unemployment benefits dropping to a seasonally adjusted 372,000. This was the fourth time claims have fallen in the past five weeks. Consistent reports under 400k have been welcomed in recent weeks, but it's still a long way to a solid recovery.

Additionally, the ADP National Employment Report stated that 325,000 private-sector jobs were added in December. Nevertheless, the real test for this week will be today's report on December's employment situation, including nonfarm payrolls and the latest unemployment rate. Economists are anticipating that payrolls will grow by 150,000, but that the overall unemployment rate does not exhibit much change. The official rate is currently 8.6%.

As stated in yesterday's column, the resistance which hit once again at 8:30 a.m. as the indices tested morning highs left the market set for a pullback into Thursday's opening bell, but without solid price development for a break in the larger 30 minute channel that had been forming week-to-date. Thursday's selling continued past the opening bell, but by 10:00 ET the indices were once again hitting support from premarket lows.

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