The upside we were looking for on Thursday materialized early on in the session. Although the market opened relatively unchanged from the prior day's close, the indices immediately began to slowly climb higher. This first wave of buying was merely an extension of the move into the previous day's close, but it took the market to new highs on the month. The pace slowed and the market pulled back off the 10:15 ET reversal period, but the 5-minute 20 period simple moving averages held in the Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 and the gradual ascent resumed.



The Nasdaq experienced the greatest degree of correction into mid-morning, making it more difficult to break through the morning highs as it rose intraday. It came back into the zone of those highs at the 13:00 ET correction period when the other indices were steadily making higher highs. This resistance held and a two-wave correction off the highs followed, leading to a downward move into the 14:00 ET correction period. The volume on the selling was weak, indicating a lack to motivated sellers, so the 15-minute 20 sma held very well and the strongest move of the session kicked off coming out of this time and price support. Although the momentum slowed into the final hour once again, the rally continued into the closing bell.



The Dow ($DJI) rose 174.9 points, or 1.3%, on Thursday, closing at 13,619.9. 27 of its 30 components posted gains. American Insurance Group Inc. (AIG) was one of the top performers, rising 3.2%, or 5.5% per share. The S&P 500 ($SPX) rose 22.33 points on the session, or 1.5%. It closed at 1,507.34. The Nasdaq Composite ($COMPX) rose 42.67 points, or 16.1%. It ended the session at 2,709.03.

A strong incentive for the bulls was the afternoon announcement by President Bush and other key officials in administration regarding the development of strategies to provide aid for the struggling subprime borrowers. The plan involves freezing interest rates for as long as five years, but does not include any government funds. Loans entered foreclosures during the third quarter were reported to be at record highs. The rate of loans at some point within the foreclosure process hit 1.68%, up 0.28% from the previous quarter.



Despite the buying, the volume in the indices continued to drop on Thursday. I am still looking for a bit more upside into Friday though. This will be the third day of the rally and after 2.5-3 days of upside, whereby the 15 minute 20 simple moving average holds, the market has a tendency to pull back further to break that moving average support into the afternoon or next day following such a move. This would mean another correction heading into early next week off Friday's highs.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.