Equities Rally on Thursday, Dow Gains 200 (by Drew)

Hello Slopers, Drew here from Tilt with a recap of Thursday's session. Whether it was sparked by the better than expected GDP number, or the short-term oversold conditions, equities rallied strong on Thursday gaining about 2% across the board. Pictured below, the 60-minute S&P 500 chart.

Some greedy bears likely got hurt pretty bad during today's rally. These sharp "V" bottom reversals can be devastating for those who enter near the bottom during the "excitement", and fail to utilize proper stop-loss management to avoid getting massacred. A couple of key short-term levels to watch on the S&P, keep an eye on the 200-hour EMA at 1065, and major resistance in the 1080 area.

In my update on 10-27-09, I mentioned "After examining the short-term charts, I see little evidence of a reversal so for now the intermediate correction is still in play. Overall, I expect action to be contained within the 20/50 day EMA's for the next couple of sessions. Prices will likely be compressed or bounce around the area between the declining 20 day EMA and the rising 50 day EMA". With that being said, two days later we find price action contained within these widely followed EMA's, on both the NASDAQ and S&P 500. There is still limited evidence of a confirmed reversal as of Thursday's close, and I recommended that one continues to watch this compressing trading range.

A quick discussion on relative performance. The S&P and Dow were up 2.3% and 2% today, the NASDAQ lagging with a 1.8% gain for the session. Over the last few days, I have mentioned the fact that the NASDAQ has been getting hit especially hard on the down-days. Outpacing the declines on the other indices for the last week or so. The NASDAQ is decisively under-performing the other market indices, as it is gaining less on the up-days, and decreasing more on the down-days. This activity is also recognizable on the charts, compare the relative location of current prices on the NASDAQ and the S&P, the picture is clearly much weaker in Tech.

Also, the S&P has cleared the prior day's high (Wednesday), while the NASDAQ printed a clear "inside day" on Thursday and the entire trading range was located inside the range of prior day (Wednesday).

Below the two daily charts, I have posted weekly charts from our Equity Indices page of the NASDAQ and Dow. As of Thursday's close, the NASDAQ is down 2.6% for the week, in contrast to the Dow which is down by 10 points (.1%) for the same period. There is clear 7-week trading range on the NASDAQ, note declining volume throughout the "rectangle" pattern.

   

  

The Dollar closed just a hair under support (75.96). Transports also found support at critical early October lows, after declining five out of the last 6 sessions.