Good day! Let's take a closer look at the day's action, however, and you will soon see that despite the gains, the market's performance on Wednesday was anything but stellar. As we expected heading into this short, but data-packed trading week, the market has been on quite a roller coaster ride.

The economic data has whipped the market around one way and then the next since Monday morning and has been the driving force in morning action. The primary reason for such strong, short-term impacts is the fact that the indices are quite extended on the weekly and even monthly time frames and everyone is jumping over themselves trying to decide whether or not the market can push to another higher before correcting or if this is all there is for now and that larger weekly correction will hold last month's highs.

In Tuesday's session the market turned around off lows with a shift in momentum to create a rounded low mid-day and into the afternoon. The right side of this bowl formation could have fallen into a longer trading range, but the market was propelled higher once again on the short-term time frames thanks to positive economic data on Wednesday morning.

The Institute for Supply Management manufacturing index rose from 42.8 in May to 44.8 in June. This is the strongest level since September. This was lower than expected and still under 50, indicating contraction, but the increase suggested that the worst could be over. The market did flush lower at 10:00 ET, but reversed again very quickly back to highs. In other news, the National Association of Realtors' Pending Home Sales Index rose 0.1% in May. This was the fourth month in a row, which was the first time the market had seen a 4-month increase since 2004.

The market rallied into 10:30 ET, pushing sharply into the resistance from the previous day's highs. Since the momentum was so strong into this resistance zone, the indices actually managed a slightly higher high, but held the resistance zone and pulled back into the 5 minute 20 sma where they congested throughout mid-day. The momentum continued to weaken at this point with a series of steps lower on increasing momentum. After the market broke lower out of the mid-day range the 5 minute 20 sma served as resistance.

As I mentioned in the opening paragraph, the market closed higher on Wednesday, but the action was still not positive. This was due to the reversal off the intraday highs and the fact that momentum rose throughout the afternoon on the downside. The slightly higher highs in the morning created a trap and the market had already put in three waves of buying on a 30 minute time frame, so this served to round off highs on that same time frame, which means that it would be very easy for the indices to continue to display weakness into next week. The potential still remains for one more test of highs on the daily time frame, but this intraday action is going to make it more difficult on the S&Ps and Dow and makes the market even more at risk of a larger flush lower.

On Thursday the Bureau of Labor Statistics will be publishing the official estimates for Nonfarm Payrolls. May factory orders are also due to be released. The U.S. markets are closed on Friday in observance of the 4th of July holiday, so expect action to be particularly light on Thursday once we get past the morning's economic news.

The Dow Jones Industrial Average ($DJI) rose 57.06 points, or 0.68%, to close at 8,504.06 on Wednesday.Kraft (KFT) ended the session well ahead of the rest of the Dow's 30 index components with a gain of 5.01%. This came after General Mills (GIS) raised its 2010 guidance, providing a boost for food stocks. Next in line was Intel (INTC) with a gain of 2.96%, followed by Coca-Cola (KO) with a gain of 2.48%. The main losers were the financials. Bank of America (BAC) fell 1.14%, followed by a 1.03% loss in American Express (AXP), and a 0.85% loss in JP Morgan (JPM).

The S&P 500 ($SPX) climbed 4.01 points, or 0.44%, and closed at 923.33. Crude oil futures fell 0.8% to $69.31 for the day after hitting $71.85 a barrel earlier in the session. The American Petroleum Institute reported that crude supplies fell 6.8 million barrels last week to 349.7 million barrels, while the Energy Information Administration reported a drop of 3.7 million barrels in crude supplies. This was greater than expected. Oil companies Exxon Mobil (XOM) and Chevron (CVX) were also up despite the crude decline. Although oil supplies were lower, gasoline supplies rose well over 2 million barrels. Retail gasoline prices averaged $2.63 a gallon with a year-to-date increase of 62.64%.

The Nasdaq Composite ($COMPX) added 10.68 points, or 0.58%, and it closed at 1,845.72 on Wednesday. Tech stocks were strong and the Philadelphia Semiconductor Index ($SOX) did particularly well and was up 1.5% with each of its 19 stocks closing higher.

Upcoming Economic Reports and Events:

Thursday, July 2, 2009
8:30 a.m. June 27 Weekly Jobless Claims: Previous: 627K.
8:30 a.m. June Non-Farm Payrolls: Previous: -345K.
8:30 a.m. June Unemployment Rate: Previous: 9.4%.
10:00 a.m. June 20 DJ-BTMU Economic Barometer
10:00 a.m. May Factory Orders: Previous: +0.7%.
10:30 a.m. June 19 EIA Natural Gas Inventories
4:30 p.m. June 22 Money Supply

Key Earnings Announcements This Week:

Thursday, July 2, 2009
Before: AYI, MEI, MSM
After: SGK (?)

Friday, July 3, 2009
Before: -
After: -

Check out my BLOG for detailed comparisons of the current daily price development to similar occurrences of price development in the past.

Toni Hansen is a Market Analyst and Trader with www.tradingfrommainstreet.com. She can be reached at Toni@tradingfrommainstreet.com.