After Wednesday's sharp rally, the market did a really nice job of holding up into the morning as Thursday's session kicked off. Picking up where it left off the previous afternoon, the markets continued higher right out of the open. The Labor Department reported at 8:30 am ET that first-time jobless claims fell last week for the fourth week straight by 1,000 to 301,000, bringing it to its lowest levels since September, but this had little affect upon the open. The buying began immediately following the opening bell. This extended Wednesday's move without any break in the intraday trend.

Within the first 30 minutes of trading the Dow had added yet another 100 points to its previous day's gains. Ironically, assisting in this move was news from the housing market at 10:00 am ET. The National Association of Realtors reported that sales of existing homes fell 2.2% in December, bringing the year-end sales down 13%. The median sales price for existing family homes also dropped for the first time on record, falling 1.8%. This is likely the first time such an event has occurred since the Great Depression. The good news, which the market latched onto initially, was that inventories of unsold homes fell 7.4% in December. This little piece of data was not enough to continue to push an already extended rally, however, and within a couple of minutes the Dow was back into negative territory.



After falling quickly from the morning highs, the market began a game of tug-of-war, struggling to hold on near highs, but at the same time giving itself a chance to correct and attempt to rebuild momentum. The drop after 10:00 am ET took the indices back into premarket trading levels and price support before bouncing higher again and flirting between positive and negative territory into noon. Momentum slowed on the upside, with a push from 11 to almost 12:00 ET forming three waves of buying. It was the second upside move on the 5-minute, however, and this created a short setup into the early afternoon on the 5-minute time frame that took the market back to the zone of the morning lows and left the market pace a bit more bearish.



Since the time correction from the earlier rally into the day was still rather minimal, the market was left feeling a bit precarious Thursday afternoon. The bulls, however, were not yet ready to give up their booty and fought to hold the morning's price support. Once more the markets pulled into the morning highs, and once again those highs held. A final push into the closing bell, however, landed the markets firmly into positive territory with closes near the highs of the day. A federal stimulus plan put together by the House and White House was welcome news, but I am not sure that it had much impact upon the markets. Beginning in about late April to early May, households with annual earnings of under $187,000/year will automatically receive tax rebates up to $1200, assuming the bill passes within the next couple of weeks.



On that note, the Dow Jones Industrial Average ($DJI) closed at 12,378.6 with gains of 108.44 points, or up 0.9%. The S&P 500 ($SPX) gained 13.47 points, or 1%, and closed at 1,352.07. The Nasdaq Composite ($COMPX), which had been lagging in recent weeks, had the largest percentage gain. It closed higher by 44.51 points, or 1.9%, at 2,360.92.

On the New York Stock Exchange the advancers outpaced the decliners by approximately 2 to 1, while on the Nasdaq advancers beat out decliners by about 4 to 1 on Thursday. Among the top gainers were NVE Corp. (NVEC) (+35.49%), F5 Networks Inc. (FFIV) (+22.89%), Polycom (PLCM (+16.97%), Baidu (BIDU) (+13.69%), Qualcomm (QCOM) (+10.32%), Mosaic Co. (MOS) (+12.26%), Consol Energy Inc. (CNX) (+11.18%), and National Oil Well (NOV) (+11%). Among the notable losers were Expeditors Intl. (EXPD) (-6.08%), Varian (VAR) (-7.01%), AT&T (T) (-2.6%) and THQ Inc. (THQI) (-22.31%).

As the week continues, so too should the market correction off Tuesday and Wednesday's lows. The 12,600 zone remains resistance in the Dow. I have marked the daily resistance zones on the charts of the QQQQ, SPY, and DIA. These price congestion zones also correspond to the 20 day simple moving averages. If the momentum remains strong, we could see it push past those levels over the next week or two and push back up into December's congestion, but it will likely stall first before it could manage such a move.

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.