The market held up rather well on Thursday heading into the extended holiday weekend. On Wednesday the indices headed lower for a third low on the 60 minute time frame since breaking for a continuation on the downside the previous Thursday. As the week began we had originally been looking for a series of two slightly lower lows following the one made on the 27th. The first slightly lower low came on Tuesday morning. The second lower low, and third total, began on Wednesday following a gap higher that morning. When Wednesday's trade concluded, the Nasdaq was the only one of the three major indices to have established a second lower low. The S&P 500 and Dow Jones Industrial Average had both held Tuesday's lows. After gapping higher on Thursday, however, they made a push to complete the pattern.

The index futures had been trading in a fairly narrow range in the premarket on Thursday. When June's jobs data was released at 8:30 am ET, however, they shot higher. At that time the Labor Department reported that payrolls for last month fell 62,000 to match the losses in May. So far this year the payrolls have fallen every month. The jobless rate in June remained steady at 5.5%. The data was a bit worse than anticipated since the unemployment rate had been expected to come in at 5.4%. Total hours worked fell 0.1% in June with an 0.5% drop in June in the factory sector. Unemployment is expected to rise further as the year wears on. Some of the sectors hit hardest have been construction, manufacturing and the temp-agencies.

The Labor Department also reported that initial jobless claims rose by 16,000 the week before to hit 404,000.

In related news, average hourly earnings rose by 6 cents to $18.01 in June. Over the past year the average hourly earning are up 3.4%, while consumer prices have risen by 4.2%.

Additionally, the government reported on Thursday that employment fell by 155,000, while unemployment rose by 12,000 in June with the overall labor force falling by 144,000. Labor force participation dropped by 0.10% to 66.1%.

Dow Jones Industrial Average ($DJI)


The gap higher in the indices led to an open at the 5 minute 20-period simple moving averages in the S&P 500, Dow Jones Ind. Ave., and Nasdaq 100 EMini futures. This resistance held and the indices began to sell off immediately. The downside continued with all three indices hitting new lows on the week until the 10:00 ET data came out. At that point both the S&P 500 and Nasdaq Composite flushed to the lower trend channel created by connecting the low from June 27th to the one on July 1st and extending that line outward.

The Institute for Supply Management (ISM)'s non-manufacturing sentiment index fell sharply in June to 48.2%. Reading over 50% indicate growth, while under 50% indicates contraction. In May it had come in at 51.7%. The indices dropped with the news, but very quickly began to recover. The momentum shifted after the larger channel support hit and by 10:15 in the Nasdaq, 10:45 in the Dow, and 11:15 in the S&Ps, the indices returned to their opening highs.

S&P 500 ($SPX)


The market had a more difficult time holding onto the late morning's recovered losses than it did making them back. When the opening highs began to hit, the pace shifted on the smaller time frames. By the time those price resistance levels actually hit, the buying was quite a bit slower than it had been immediately following the pivot off lows. This created rounded highs on a 5 minute time frame and made it easy for the indices to turn into noon. I left a bit early on Thursday, figuring the last two hours would have light volume and little action, but the reversal also came off 15 minute 20 sma resistance and followed through rather well into the early afternoon before falling into a range in the final 45 minutes of trade.

Nasdaq Composite ($COMPX)


The Dow closed higher on Thursday by 73.03 points, or 0.7%, at 11,288.54. The losses for the week came in at 0.5%, which has it down more than 20% off last year's highs. The S&P 500 rose 1.38 points on Thursday, or 0.1%, and closed at 1,262.9. This is a 1.2% loss for the shortened trading week and a 19.2% loss since last October. The Nasdaq Composite once again had a more difficult day. It fell 6.08 points, or 0.3%, and closed at 2,245.38 for a weekly loss of 3% and a loss of 21.5% since last year. Although volume was light on the day as a while given the early close, it was on the heavy side in the first several hours, dropping off only slightly over lunch. The steep decline out of the open and a move to record highs in crude oil kept things interesting. On Globex with electronic trade crude hit $145.85 a barrel, while it hit $144.30 a barrel on the New York Mercantile Exchange.

Given the current price formation on the 60-minute time frame, I am expecting the market to bounce back this coming week. The congestion zone from two weeks ago leading into this newest low will become resistance, as will the 20-day simple moving averages.

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.