AFTER MIDNIGHT
Market Commentary by Toni Hansen
April 1, 2004
Good morning! The market ended the first quarter of the year on a choppy note with the first negative quarter in a year in the Nasdaq, continuing the action we have seen a lot more the past few weeks and falling within expectations. Concerns over OPEC production cuts, rising gas prices, weaker than expected economic data, and a falling dollar were the main topics of the day on Wednesday. The market traded higher in the premarket, but by the open the indices were back to near Tuesday's close. Support hit early on into the morning with the 9:45 ET reversal period and then things fell quiet into the 10:00 ET economic numbers.
When the number hit, the market took the news poorly. Both the Chicago PMI and Feb. factory orders came in under expectations. The PMI came in at 57.6% in March as opposed to the 61.6% expectation which the February factory orders only rose 0.3% as opposed to the anticipated 1.7%. As a result, the market fell rather quickly coming out of the 2-5 minute bear flag it had formed off the support.
It didn't take long for an exhaustion move to form with a spike in volume as the market came into the 10:15 ET reversal period. This hit along with the 5 minute 200 sma intraday in the SP500 and Dow. From there the market pulled higher at a pace near average before forming a 2 minute Phoenix to continue into the 5 minute 20 sma. Since the move was not on the weaker side, it made another breakdown more difficult and when it tried at about 11:30 ET the SP500 and Dow Jones Ind. Ave. held the 5 minute 20 sma support. It based along this support to suggest a potential breakdown in the form of an Avalanche, but the pattern failed to trigger and the market moved higher again as the SP500 retesting morning highs. This made it likely that the market would remain in a range into the afternoon.
After hitting resistance around 12:15 ET the market pulled back into the 5 minute 20 sma again. This time though the market began to round off at highs and when the 13:30 ET reversal period hit the market finally managed a 5 minute Avalanche to follow through nicely into the prior lows on the 5 minute charts and the 5 minute 200 sma support again.
Even though the market looked favorable for a bear flag on the 5 minute charts as the market began to base at lows, when the support hit for a second time on the 1-2 minute charts the Dow managed a slightly lower low to form a 2B reversal pattern while the Sp500 and Nasdaq formed double bottoms. This along didn't mean the 5 minute bear flag still wasn't possible, but the stronger pace coming out of the support at the second low nullified that potential as the market pace began to accelerate on the upside and the SP500 and Dow again retested intraday highs. From there the market formed a 5 minute 1-2-3 continuation pattern and those two indices broke to new intraday highs while the Nasdaq pulled into its own morning highs and resistance from the highs of several days back.
As the resistance hit going into the last hour of the day and the 15:00 ET reversal period, the Nasdaq formed a 2T reversal on the 2 minute charts while the SP500 and Dow both formed reversal candlestick patterns at highs and began to selloff. The move continued into the 5 minute 20 sma where again the market formed another Avalanche to bring the indices into the 15 minute 20 sma. At that level the indices fell into a bear flag to put in three waves of selling on the 5 minute charts into the close, bringing the Nasdaq back to prior 15 minute lows.
The rest of the week will continue to be more affected by economic releases as the jobs data starts to come out. Thursday's Institute for Supply Management index is expected to pull back a bit to 59.8% from 61.4%. With the current reading it is showing that the majority of manufacturing firms are reporting improving business. As far as Friday's jobs data is concerned, March payrolls are expected to grow by 117,000 jobs, making it the best job growth since December of 2000 while the unemployment rate is expected to remain unchanged at 5.6%. On the daily charts the market has room to move either way still so I will continue to fall back on intraday action for now with the 50 day sma overhead as a key resistance level from which I would anticipate a correction of a week or two. |
