Dow 10K - Indices Boosted by Positive Earnings Results from INTC and JPM

Dow 10K - Indices Boosted by Positive Earnings Results from INTC and JPM

(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! The Dow Jones Industrial Average pushed above the 10,000 level for the first time in just over a year on Wednesday. The catalyst for the strong advances on the session came from positive earnings in both Intel (INTC) on Tuesday afternoon and J.P. Morgan Chase on Wednesday morning. INTC closed higher by 1.7% at $20.83 a share following better-than-expected results and positive fourth-quarter guidance. It's third-quarter revenue was up 18% from the previous quarter. JPM rose 3.29% after its earnings came in at $0.82 share, compared to $0.09 a year ago. Analysts had expected between $0.41-$0.65 a share. At the same time, however, the bank reported that loans at least 90 days past due have more than doubled compared to the third quarter last year.

Dow Jones Industrial Average ($DJI)


After jumping higher on the INTC earnings on Tuesday afternoon, the index futures fell into a trading range until the 5:00 ET correction period. At this time the futures broke higher once again and continued out of the 7:00 am ET correction period. At this time, however, the pace in the futures began to shift. When the opening bell rang the market began to sell off and start to fill in the gap. The initial wave of selling took place into approximately the 9:45 ET correction period. The market bounced at that point, but fizzled quickly and fell for a second time out of the 10:15 ET correction period. Both the S&P 500 and Dow made slightly lower lows, but the Nasdaq held. The result was a 2B reversal off the 5 minute 20 period simple moving average support zone that led to a break higher out of the 10:45 and 11:00 ET correction periods.

The Dow Jones Industrial Average was the strongest of the three major indices in Wednesday's session. The 10,000 level was dangling overhead like a prize suddenly within reach. The late morning push ran into trouble when the S&Ps and Nasdaq hit their morning highs, but the Dow managed to push to new highs on the day before falling into a trading range at that level. The Nasdaq formed an inverted "V" at highs, pushing it into an even longer trading range into the afternoon, but the S&Ps and Dow corrected gradually and broke higher out of the 13:00 ET correction period. This push took the Dow to that desired 10K, but it struggled until 15:00 at that level before pushing above it in the final hour of trade.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) ended the session strongly higher by 151.53 points, or 1.54%, on Wednesday to close at 10,022.59. The top performer was Bank of America (BAC) following JPM's earnings. BAC rose 4.38%. DuPont (DD) came in second with a gain of 3.66%. Pfizer (PFE) rose 3.52% and Caterpillar (CAT) gained 3.36%. Despite the strong leaders, 5 index components still lost ground in Wednesday's session. The weakest was John & Johnson (JNJ), which disappointed earlier this week. It fell 0.75%. Home Depot (HD) slipped 0.54%. WalMart (WMT) was down 0.30%. Verizon (VZ) and AT&T rounded off the losers list with weakness in the telecoms.

Nasdaq Composite ($COMPX)


Meanwhile, the S&P 500 ($SPX) rose 18.83 points, or 1.75%, and closed at 1,092.02. Most of the top gainers in the S&P 500 were companies whose shares gapped substantially higher out of the open on Wednesday. A large portion of them offered very strong gap setups for continuation moves in the direction of the trend throughout the session. The second-best performer, Legg Mason (LG) was a perfect example. It gapped up to push to new 52-week highs after trading in a range along those highs for about a month. The stock had closed at lows in the previous session and the open on Wednesday was above Tuesday's highs, creating a bear trap that also helped propel the stock higher. Trading ranges at highs intraday out of the open and again in the first half of the afternoon led to strong buy setups and a close just shy of the day's highs for a gain of nearly 10% on the session. Share prices in most of these types of setups were in the $15-30 range, making them ideal for daytraders.

Oil and gold also made headlines yet again and boosted energy and metal stocks higher. Crude oil futures topped $75 a barrel before closing at $74.85 a barrel. Gold hit another record high of $1,072 an ounce intraday. It closed at $1,064.70 an ounce. Exxon Mobil (XOM) rose 2.3%, Chevron (CVX) was up 1.9%, and Freeport-McMoRan Copper & Gold (FCX) was up 1.8%.

The Nasdaq Composite ($COMPX) rose 32.34 points, or 1.51%, and it closed at 2,172.23 on Wednesday.

All three of the major indices ended the session with a closing price not seen in over a year. The Dow is now up 53% off March's lows. The S&P 500 is up 61%. The Nasdaq is up 71%.

So... where does this leave the market now? Well, that is going to depend on whether the market holds the upper end of the daily trend channel or not. It can easily hit this within the next day. 10,240 is the 100 week simple moving average in the Dow, which is the next larger time frame resistance level and would also be close to that channel resistance zone. The 20 week sma remains support. It is currently 9,180 and rising. The momentum is bullish on the smaller time frames heading into Thursday, so use caution going against the trend.

October is a correction month, but if the channel from the past two months that was slower than the June rally breaks higher then it can potentially be the kick-off to another stronger wave of buying whereby the correction period is a break out of the slower trend channel. I spoke of this potential a few weeks back as a way for this to play out due to the rounding off that took place into August where the pace slowed on a 60 minute before falling into the channel that has followed, although most of our focus has been on watching for signs the market would roll over at this resistance. Without any shift in momentum on a 60 minute time frame first with strong downside followed by slower upside, however, there hasn't been any confirmation to trigger such a correction. We may still see it coming off the upper end of this daily trend channel, but only if the market can manage to pivot quickly off the resistance level, preferably after slowing down into it.