Market Stalls but Remains Weak

Market Stalls but Remains Weak

(Note: Unless otherwise stated, the index action described below relates to the EMini 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.)


Good day! On Wednesday the market continued to push the downtrend that has been in play since the indices triggered a momentum reversal short heading into the week. The trend persisted into the 10:45 ET correction period on Wednesday morning, but as I mentioned yesterday, the intraday trend was already becoming extended into Tuesday's close, so the move did not get far.

Downside was primarily led by the S&P 500 and Dow Jones Industrial Average, while the Nasdaq Composite once again displayed a great deal of relative strength. Early morning data with crude oil inventories accounted for the last flush on the downside at 10:30 ET. Oil supplies fell further than expected last week, while gasoline supplies increased. Earlier in the morning a report on consumer prices showed a smaller-than-expected increase. The Philadelphia region manufacturing survey and weekly jobless claims will be coming out on Thursday.

Dow Jones Industrial Average ($DJI)


When the 10:45 ET correction period hit in the indices, the market pivoted strongly. This was a third low for the Nasdaq on a 5 minute time frame whereby each low was only slightly lower than the previous one. This created a momentum reversal buy setup that was just the opposite of the larger 60 minute time frame short that triggered on Monday. It also confirmed the role of the Nasdaq as the upside leader on Wednesday. The channel made by the momentum shift broke higher out of the 11:15 ET correction period to confirm the intraday reversal. The S&Ps and Dow broke 5 minute 20 sma resistance at the same time.

Buying continued quickly in the market until 15 minute 20 sma resistance hit in the S&Ps and Dow and the 5 minute 200 sma hit on the Nasdaq. The indices then fell into a trading range with a slight pullback into noon to form a 5 minute bull flag that broke higher with another pivot taking place off resistance at 12:30 ET. Another congestive correction followed, triggering a slightly larger bull flag out of the 13:00 ET correction period and into 13:30 ET. The result was a strong push back into Tuesday's highs in the Nasdaq and Tuesday's closing highs in the Dow. The Dow and S&Ps also both hit strong 5 minute 200 sma resistance and this spelled the end of the session's recovery attempt.

S&P 500 ($SPX)


The afternoon advance was led by health care, consumer discretionary, and information technology shares. The laggards included energy, financials, and materials. After 14:00, however, even the stronger Nasdaq succumbed to the selling pressure once again and trended steadily lower on the 5 minute time frame into the closing bell. An Avalanche™ at 14:30 ET triggered and broke the 5 minute 20 sma support zone that had held throughout the rally and after that point it became resistance that held into the close.

Nasdaq Composite ($COMPX)


The Dow Jones Industrial Average ($DJI) fell 7.49 points, or 0.09%, to close at 8,497.18 on Wednesday. The index itself was fairly evenly split between the winners and the losers. On the positive side were Pfizer (PFE) with a gain of 2.97%, Home Depot (HD) which was up 1.94%, and Intel (INTC) up 1.77%. Leading the downside were General Electric (GE) with a loss of 4.15%, Alcoa (AA) with a loss of 3.76%, and then the financials of the group starting with Bank of America (BAC) with a loss of 3.38%.

The S&P 500 ($SPX) fell 1.26 points, or 0.14%, and closed at 910.71. Crude oil futures fell to $69 a barrel earlier in the session, but recovered to close high by $0.56 at $71.03.

The Nasdaq Composite ($COMPX) gained 11.88 points, or 0.66%, and it closed at 1,808.06 on Wednesday.

The market doesn't have a strong directional bias on the 60 minute time frame heading into Thursday. The indices are all still extended on that time frame and at some support, but the larger support on the daily charts that will continue to act as a magnet is the 50 day sma. This interplay will most likely create some more choppy trading into the weekend with less follow through on new daily triggers.