Dow Closes Above 13,000

Good day! The market took me a bit by surprise on Thursday, I had been anticipating another choppy day, most likely holding the lower end of Wednesday's range. The Nasdaq Composite ($COMPX), led by the tech sector, was the strongest advancer and essentially took the rest of the market along for the ride. The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) had held the lower end of Wednesday's range with slower upside throughout the morning, but the Nasdaq buying began quickly almost immediately out of the open.

The indices opened with relatively little change off Wednesday's closing levels. Ahead of the open the Labor Department reported on the weekly jobless claims, which rose 35,000 to 380,000 for last week with continuing claims holding four-year highs. In addition, consumer prices reportedly increased by 0.3% in March, while incomes rose 0.3%. Consumer spending rose 0.4%.

Upside began within 15 minutes of the open and continued into 10:00 ET. At that point the rally in both the S&Ps and Dow stalled. More economic data came out at this time with the Commerce Department reporting a 1.1% decline in construction spending and the Institute for Supply Management index holding at 48.6% in April to indicate contraction in the manufacturing industry. New orders and production are gradually declining, but prices are continuing to rise.

The S&Ps and Dow fell into bases along the morning highs out of this data while the Nasdaq continued to step higher. The base in the S&Ps and Dow created a Phoenix formation on the 5 minute time frame with a buy setup triggering out of the 10:45 ET correction period. The momentum did not increase at all with this breakout, however, and the S&Ps and Dow fell into another range along the highs from 11:00 ET throughout the remainder of the morning. The Nasdaq also finally formed a longer correction.

By noon the Nasdaq was substantially more extended than the rest of the market. When the range along the morning highs gave way the Nasdaq had a much more difficult time gaining a foothold. Although it climbed steadily higher, the S&Ps and Dow took over the lead and surged to new highs on the day.

At 13:00 ET the S&Ps were testing Wednesday's highs and I began to look for the market to fall more into a trading range throughout the afternoon. Although this range did take hold, it took another 15 minutes and one more flush of highs before it got underway. All three of the indices were back to testing the upper channel of the daily trend channel by that time, which has been in place over the past two weeks. I have drawn the channel on each of the daily index charts to show the move from the lows and back to the highs on Thursday.

The market finally had extended itself to the point intraday that it simply had to fall back and catch its breath when that upper resistance hit at 13:15 ET. It did so over the next 45 minutes with the 5 minute 20 sma serving as support in the S&Ps and Dow. They hit at the 14:00 ET correction period and the market bounced back into the zone of the day's highs. This created a double top shorting opportunity for daytraders and continued with a two-wave pullback on the 2-5 minute charts into the 15:30 ET correction period. This completed a two-wave correction on the 15 minute charts and the market was able to rally once again into the closing bell.

Thursday's session ended with a 189.71 point gain in the Dow, or +1.5%, at 13,010.00. This was the first close over 13k since January 3rd. 25 of the Dow's 30 components posted gains. Financials were particularly strong on the day. American Express (AXP) gained 6.9%, while Bank of American (BAC) climbed 4.9%, and Citigroup (C) rose 4.2%. Tech shares also led the morning rally. Intel (INTC) climbed 4.6%, while Microsoft (MSFT) rose 3.1% on Thursday. Oil, energy, and gold turned around in the afternoon, rallying strongly while the rest of the market stalled. The S&P 500 closed higher by 23.75 points, or 1.7%, at 1,409.34. The Nasdaq gained 67.91 points, or 2.8%, and closed at 2,480.71.

Given that the momentum on a 60 minute time frame has shifted once again, The market now has the greater potential to break through the highs of the daily channel. Ideally the market will form a slower correction off one end of this channel or another before it really breaks to show more confirmation of a break to come. That does not always happen unfortunately, but it's what I tend to look for when establishing larger positions. The next daily resistance in the Dow will be at about 13220. 12617 is support. 2509 is the next Nasdaq Composite price resistance zone. 2377 is support.

Dow Jones Industrial Average ($DJI)



S&P 500 ($SPX)



Nasdaq Composite ($COMPX)