Morning Update: 9/21/2012

The stock market indices had a strange session after a very steep opening gap down, and then further downside movement. They then snapped back sharply, paused at resistance, backed off, but held support, and came on again in the afternoon, reaching the session highs with about 35-45 minutes to go. They rolled over hard into the close with about 10 minutes to go, and snapped back sharply in the last 5 minutes to preserve some of the gains on the Dow.

Net on the day, the Dow closed up 18.97 at 13,596.93, just 3 points off the high and about 93 points off the low. The S&P 500 did well to snap back 11 points off the low, down .79 at 1460.26, but couldn’t quite get into the plus column, although it was just a point off the high. The Nasdaq 100 came back 19 points and closed down 2.33 at 2861.70.

So all of the indices snapped back, but only the Dow got back into the plus column.

Advance-declines were still 3 to 2 negative onNew York Stock Exchange, and 3 to 2 negative on Nasdaq as well. Up/down volume was nearly 2 to 1 negative on New York, with total volume of 632 million shares. Nasdaq traded over 1 3/4 billion, and had a 4 to 3 negative volume ratio.

Despite the snapback, we appear to have rallied back to resistance, so it’s going to be key to get a follow-through tomorrow. If they open lower and/or take out today’s lows, the market is in trouble short-term. We’ll have to wait and see.

Stepping back and reviewing the hourly chart patterns, the indices had a big down gap at the opening, followed by a quick bounce, and then lower lows, which turned the market around when the NDX tagged 2842, and change, and the S&P 500 tagged 1450. That resulted in a strong 3-wave snapback. After a late pullback, they snapped back again, and went into the close mixed on the session, narrowly so on all 3 indices. The Dow closed up, while the S&P 500 and Nasdaq 100 closed down today.

We’ll see what happens tomorrow.

Friday, September 21

No U.S. major economic reports
11:00 Fed to buy $1.5b-$2b bonds in 10 to 20-year range
03:00 NZD Credit Card Spending
08:30 GBP Public Finances
12:30 CAD CPI

KB Home 
(KBH) EPS -15c
Darden Restaurants (DRI) EPS 84c

The Philadelphia Fed mfg. index came in at -1.9, better than the expected -4.0. Initial claims were 382,000, more than the consensus 373,000. There are no important economic releases on Friday, but don’t forget the quadruple expiration.


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