Stock Market Stages Recovery Into Final Trading Hour


Simpler Trading Team

4 min read

After a choppy, volatile daily session, the stock market managed to recover back to flat in the final hour of trading.

As the market holds its breath heading into the Friday release of nonfarm payroll numbers, one sector is showing strength through the uncertainty.

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Stock market stages recovery as indexes are flat

The three major indexes took a step back on Wednesday after back-to-back sessions surging forward to start the week.

In the market today, the Dow closed at 30,273.87 points to slip .14% (dropping 42.45 points on the day). The Nasdaq missed positive numbers by .25% closing at 11,148.64 points while the S&P 500 was negative by just .20% at 3,783.28 points.

The stock market received a boost when ADP payroll services firm reported a slightly higher than expected 208,000 jobs added in September. The higher number was bolstered by the trade, transportation, and utilities sector.

Nonfarm payroll numbers slated for release Friday by the Bureau of Labor Statistics are weighing heavily on the stock market. The estimate for jobs on Friday is at 275,000, and any deviation could send the market running.

Simpler’s traders lean into technical stock chart analysis when working trade setups, but this week the jobs data is calling the shots in market momentum.

“If nonfarm payroll is a strong number, the downtrend will resume,” said Raghee Horner, Managing Director of Futures Trading at Simpler Trading. “If nonfarm payroll is a weak number we will rocket higher.”

Energy sector potential opens up for traders

Traders wanting to step back from the whirlwind of current market conditions may consider possibilities in a sector showing strength beneath the storm.

The energy sector – commodities such as crude oil, gasoline, natural gas – are a focus across the markets as equities struggle and world economies face a daunting winter season.

Add in the accompanying energy stocks and this area of trading presents opportunities, according to Raghee.

“Oil stocks (oil companies, oil explorers, natural gas stocks) are absolutely outperforming right now without the underlying commodity,” said Raghee. “They don’t seem to give a rip.

“If you’re wondering where there might be a little more bullishness around the energy story, look no further than the oil stocks.”

Raghee pointed out that when looking at oil stocks – tickers which include FCG, XOP, XLE, XLM, DVN, OXY, XOM – consider the overall sector and identify any uptrend showing strength, particularly those above key moving averages.

Current price action similar to June low, July rally

Beneath the current market volatility, could there be a hint of what’s to come based on the summer low?

Mary Ellen McGonagle, Senior Managing Director of Equities at Simpler Trading, pointed out in an alert midweek that the S&P 500 posted a larger gain Tuesday than on Monday and this push higher put this index back above its 10-day moving average. And, while momentum indicators show the index still in negative territory, signals are close to turning positive.

Mary Ellen pointed out how price action this week is similar to the week following the June 17 low. The following week, the S&P 500 gained 6.5% which was followed by choppy price action over the next few weeks. The volatility preceded a lengthier mid-July rally, Mary Ellen highlighted.

In June, Mary Ellen shared her observations of market movement leading to a “follow-through day” as the market gained volume. This tends to fall on the fourth day following an initial market rally attempt.

“I’m highlighting this simply because Tuesday was day two of an attempted rally day after last week’s new low,” Marey Ellen said. “On Thursday – day four – we can begin to look for a possible follow-through day.”

Like in June, any rally this week is anticipated to be short-term.

Any perceived negative nonfarm payroll numbers on Friday may cut short any positive moves in this stock market while positive numbers may turn into the support the market seeks to continue rallying higher.

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