The market experienced its first real uptrend day since May 12 on Thursday when it opened near the day's lows and closed right into the zone of the day's highs. As in the prior two days of action, the morning started out on a strong note. Ahead of the open the Labor Department released its report on first-time claims for unemployment benefits. They fell by 18,000 last week, hitting its lowest levels in just over a month and provided the market with some positive news ahead of Friday's jobs data.

The market did pull back off premarket highs following the data, but when the opening bell rang this quickly turned back around. The indices moved higher almost immediately and continued at a strong clip until about 10:45 ET. The Nasdaq stalled at 10:15 ET, but held highs while the S&P 500 and Dow Jones Industrial Average continued to step higher. Action on the upside, while steady on a 15-minute, quickly became a lot more choppy after approaching initial resistance at Tuesday's morning highs in the S&P 500.

Dow Jones Industrial Average ($DJI)


The market rolled over slightly into 11:00 ET when the S&Ps formed a tiny pennant short pattern, but the 5-minute 20 sma was near at hand and served as resistance. The indices hugged this support level and began to creep higher into noon. We had seen similar action in the market on both Tuesday and Wednesday. In each of those sessions the market experienced upside throughout the morning with slowing momentum mid-day, a strong reversal lower into the afternoon, and a bounce into the end of the session.

Although the market technically looked like it was going to go for yet another repeat of this same activity, I was highly skeptical. Typically if a set of patterns in the market repeats two days on end, even if it begins the same on day 3, the second half of the day is highly unlikely to play out in a similar manner as the prior two. In fact, I cannot recall ever seeing this happen. The Nasdaq tried to give it a go and break higher into 14:00 ET to bust the pattern, but the pressure from the slowing upside in the majority of the indices was simply too much and the market did give way to selling into that time zone with an Avalanche pattern on both the S&P 500 and Dow Jones Ind. Average.

S&P 500 ($SPX)


Despite the strong downside into about 14:20 ET, I was still not willing to commit to watching for another continuation on the downside, which was what I had done in each of the prior two sessions. The result of this trend placement meant that support would hold more easily with either a range into the close or even a continuation of the larger uptrend.

Although identifying support into 14:30 ET was relatively easy due to the day's highs from Wednesday in the Dow and Nasdaq futures, the market did not form strong reversal setups up off the support such as rounded lows or a Phoenix. Instead the market just crept higher into 15:00 ET. It paused there for a minute and then the trend accelerated as it broke through the day's highs. The momentum again slowed into the close, but the indices still ended the session at the zone of the day's highs.

Nasdaq Composite ($COMPX)


Thursday's session closed at 12,604.45 with a gain of 213.97 points in the Dow ($DJI), up 1.7%. A lot of stocks trended higher throughout the day on Thursday, but Wal-Mart (WMT) was one of the main headline-grabbers after it reported a 3.9% increase in same-store sales. The S&P 500 ($SPX) rose 26.85 points, or 2%, on the day, closing at 1,390.63. The Nasdaq Composite ($COMPX) rose 46.80 points, or 1.87%, and closed at 2,549.94. Top sectors included the airlines, natural gas, securities/broker dealers, and oil services. It is rather interesting to note that the market climbed higher even though oil and energy were also rallying. We don't see that very often.

I am going into Friday's session with the expectation of highs holding within about the first 15 minutes of the day. The jobs data might affect this somewhat, since ideally I want to see a relatively unchanged open or slight upside gap for this to happen. A gap on the upside can easily hold right away and begin to fill immediately. I am then anticipating a correction with a pullback off highs throughout most of the day. It may end up correcting more through a trading range, but the bias is favoring downtrend action.

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.