Market Holds 60-Minute Range, Falling Back to Lows

Market Holds 60-Minute Range, Falling Back to Lows

(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 market reclaimed most of Tuesday's gains on Wednesday to continue to the 60-minute trading range that has been marked by wide swings from highs to lows and back again over the course of the past week and a half. The premarket action was subdued. The index futures had been selling off gradually since the previous afternoon. As in the several previous sessions, however, it was not until the opening bell rang that the momentum really increased. The 15 minute 200 simple period moving average, which also corresponded to 38.2% and 50% Fibonacci retracement levels, served as support in premarket and gave way at 9:30 am ET.

Dow Jones Industrial Average ($DJI)


The early morning descent picked up momentum into 10:30 ET and bounced slightly into the 10:15 ET correction period before hitting new lows on the session once again into 11:00 am ET. By this point the indices were once again retesting the lows of the 60-minute trading range. Unsurprisingly, this served as support and the market had a tough time attempting to break through it. Although the reaction was more gradual than the overall pace of the selloff, by midnight all three of the major index futures had recovered at least half of the losses from the drop off the previous day's highs.

So far this 60-minute trading range itself is displaying stronger bearish tendencies than bullish. We have yet to see any real change in momentum or a more minor retracement off a high or low within the range to give a high probability indication of the bias for the direction of a breakout. As I discussed earlier in the week, a slower upside move than the average within the range will indicate a higher probability of a break lower and vice versa. This is especially true if the correction holds under the 61.2% Fibonacci retracement level, and even more so if the retracement is under a 50% retracement before the channel for the correction breaks back to the outside channel of the range.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) fell 122.28 points on Wednesday, or 1.14%, to end the session at 10,603.15. IBM was the biggest loser. It fell 2.90%. Alcoa (AA) followed with a loss of 2.50%. Kraft (KFT) fell 2.14%. Only 6 of the Dow's components posted a gain. The top two were drug-makers Bank of America (BAC) (+1.04%) and Merck (MRK) (+1.01%). The drug makers were the top gainers following the election of Republican Scott Brown.

The S&P 500 ($SPX) fell 12.19 points, or 1.06%, and closed at 1,138.04. State Street Corp. (STT) was the best-performer in the S&P 500. It rose 7.13%. Northern Tr. Corp. (NTRS) was the second-best performer. It rose 5.73%. CSX Corp. (CSX) was the biggest loser. It fell 6.26%. Coach Inc. (COH) was the second-weakest with a loss of 5.61%.

The Nasdaq Composite ($COMPX) fell 29.15 points, or 1.26%, and it closed at 2,291.25 on Wednesday. Liberty Global Inc. was the best-performer in the Nasdaq-100. It rose 2.96%, followed by a 2.35% gain in Nii Holdings (NIHD). Only a dozen of the Nasdaq-100 components posted a gain. Wynn Resorts (WYNN), which had been a leader in recent weeks, was a top loser. It fell 4.43%. Ebay (EBAY) also lost 4.43%.

Nasdaq Composite ($COMPX)