One of the most positive things the market can do is rally on negative news. It means that the news has already been priced into the market and that there isn't any selling pressure left. That is what we saw happen Thursday on the much weaker-than-expected Non-Manufacturing Purchasing Managers' Index number. This isn't typically a big market mover, but after the weak manufacturing number on Tuesday, market players were skittish and sell programs loaded. There was a sharp selloff for about 15 minutes, but buyers stepped up and there was steady upside the rest of the day. Some late buying spiked the S&P 500 to the highs of the day at the close.
Things had become a little gloomy after the poor selling the last two days, so bounce action at this juncture isn't too surprising. The best bounces tend to occur in the worst market. This wasn't the best bounce, but this isn't the worst market, either.
There still are plenty of ugly charts out there and the indexes need plenty of work, before they will improve. But the action Thursday is a start. Some trading range action would be helpful, but ultimately the fate of this market will likely be decided next week when the trade negotiations with China resume.
There is the September jobs report in the morning, which will attract some attention, but after the weak PMI-Services number, the market is anticipating two more cuts from the Fed by the end of the year. That is what that main buying catalyst was Thursday. The market still loves to love the Fed and weak economic news always produces hopes and dreams of endless Fed easing.
I'm looking for choppier action Friday, but hopefully we'll see some support levels develop, which will lead to better chart formation. This is not a market that deserves a high level of trust, but at least there are some signs of stabilization.
Costco Wholesale (COST) is seeing a slightly negative reaction to its earnings after the report, which is not the sort of thing this market needs at this point.
Have a good evening. I'll see you Friday.