Indices Close at New Yearly Highs

Indices Close at New Yearly Highs

(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! After hitting the 10K mark again for the first time in a year on Wednesday, the market was a bit uncertain about where to take it from there on Thursday morning. News and earnings failed to strongly sway the indices throughout most of the session and the majority of the day was spent in a trading range (all of it in the case of the Nasdaq).

Thursday's session kicked off with a gap lower into the opening bell. The index futures had attempted to break higher out of the 7:00 am ET correction period after trading in a range since Wednesday afternoon, but the attempt was sharply reversed almost immediately and the trading range broke to the downside. Support hit at 8:00 am ET and the futures began to turn higher into the opening bell. By rounding off at lows ahead of the open, the market was able to rapidly push higher at 9:30 ET to close the gap zone in the first 30 minutes of the day.

Dow Jones Industrial Average ($DJI)


The first signs of a recovery into the open came at 8:30 ET. The futures jumped slightly with the 8:30 am ET data. Even though the move was short-lived, it shifted the pace of price action, allowing the market to fall into a trading range that eventually broke to the upside on a 2 minute time frame at the open.

The Consumer Price Index rose 0.2% in September according to the Labor Department. It had risen 0.4% in August. The core CPI, which excludes food and energy prices, was up 0.2% as well. Analysts had expected a 0.1% increase. Meanwhile, jobless claims were less than expected, but most economists are still projecting a jobless rate in excess of 10% by early next year. Weekly initial jobless claims were down 10,000 last week at 514,000. Those collecting state benefits fell 75,000 to a seasonally adjusted 5.99 million.

According to the New York Federal Reserve Bank, manufacturing in the New York region rose in October. The Empire State Manufacturing Survey climbed from 18.9 in September to 34.6. New orders rose from 19.8 to 30.8. The employment index rose from -8.3 to 10.4. This was the first time this portion of the report has been positive in over a year. Numbers over zero indicate expansion. The Philadelphia Fed echoed New York. It's manufacturing index, which came out later, also showed expansion. The reading was lower than anticipated, however, at 11.5 versus an estimate of 12.2. It was 14.1 in September.

In other news, foreclosures once again hit new record levels this past quarter. According to RealtyTrac, 937,840 homes were showing some form of foreclosure filing this past quarter. This is an increase of 23% over the same period last year. It was a 5% increase from the previous quarter. Nevada had the highest level with over 4% of households filing for foreclosure. Vermont had the least at 0.02%.

S&P 500 ($SPX)


Although the market spent most of the day weaving back and forth between the opening lows and Wednesday's close, the pace of the waves of buying and selling began to shift heading into the afternoon. A more gradual two-wave correction off the upper end of the range in the S&Ps and Dow into 12:30 ET helped pave the way for a break higher later in the afternoon. The two indices pulled up after that buy setup shortly after 13:00 ET and then fell into a more narrow trading range into 14:30 ET. Meanwhile, the Nasdaq was forming a more gradual second wave of correction on a larger two-wave pullback that began in that index around 12:30 ET. When the upper channel from the 13:30-14:30 congestion broke higher it triggered another strong move on the upside on the 5 minute time frame. This also triggered the breakout higher from the day's highs on the S&Ps and Dow.

Nasdaq Composite ($COMPX)


The afternoon rally hit resistance when the Nasdaq ran into its morning highs at the 15:00 ET correction period, but the 5 minute 20 sma support held at the 15:30 ET correction period and the market ended the day just off highs. The Dow Jones Industrial Average ($DJI) closed higher by 47.08 points, or 0.47%, on Thursday to close at 10,063. Meanwhile, the S&P 500 ($SPX) rose 4.54 points, or 0.42%, and closed at 1,097. The Nasdaq Composite ($COMPX) rose 1.06 points, or 0.05%, and it closed at 2,173 on Thursday. Crude oil futures were particularly strong and helped rally energy shares. Crude had broken out of a triangle on the weekly time frame as I mentioned several days ago and Thursday's rally was a strong continuation of that bullish trigger that took crude oil futures over $77 a barrel.

The market is poised to open sharply lower on Friday morning after hitting the equal move resistance zone in Thursday's session on the 60 minute time frame (equal to the rally off Sept. 2nd lows). We could easily see an intraday recovery early on in the session, but use a lot more caution on setups you expect to hold on the long time for several days at this point since the uptrend on the 60 minute chart is due for a larger correction once again.