The U.S. Non-Manufacturing PMI report came out at 10:00 AM and that changed the market trajectory. The reading of 56.5 was above the forecast of 53.3 and better than last month’s reading. After toping 60.3 in August 2015, the PMI is on a downward trend but still above 50 which indicates expansion.
Before the report the market was down. S&P 500 futures had been falling over night and the NYSE session started with futures more than 11 points underwater. They fell more in the first half-hour and briefly spiked up after Non-Manufacturing PMI release only to decline again, however, they still could not break below the overnight lows convincingly.
On Tuesday, after making a high since open of 2084.50 at 5:00 PM, the futures started to decline, finally making a low of 2067.50 at 10:30 PM. The bounce during the Asian session met the resistance at 2085.75 at 3:30 AM on Wednesday.
Before the open, futures bounced off the overnight low at 7:00 AM for the second time. The spike after the release of PMI could not reach above 2078.50. However, the decline post-PMI release also could not break below the overnight and it stalled 2065.75 at 10:30 AM. After that the price continued to rise for the rest of the day.
For two and half trading days, from mid-day on June 30 to pre-NYSE session open on July 5, S&P 500 futures carved out a rectangle trading box on 30-minute timeframe. The price broke below this box at the open on Tuesday, July 5th. The lower bound of the trading-box became the resistance and two attempts to break above it failed on Tuesday. The measured target of this broke chart-pattern was near 2061. The decline on Wednesday came close to this target but did not breach. The bounce that started at 10:30 AM, broke above the resistance and also above a down trend line since 2:30 AM on July 4th.
For the day, S&P 500 index made a bullish-engulfing candlestick pattern, closing up by 11.78 points after being down 14.53 at one time during the Wednesday session. This has bullish connotation and the it is quite likely that the index will test the high of 2108.71 reached post-Brexit vote.
Dow Jones Industrial Averages gained +78.00 and NASDAQ Composite gained +36.26. They both had similar intra-day chart pattern like that of S&P 500. Russell 2000 made a two-candle piercing formation and Dow Transportation Averages made a hammer pattern, both bullish formation.
