Stocks concluded one of the worst weeks in history with a frenzied pace of trading that led to mixed results in the major indices. After opening lower, then trending south throughout most of the day, the main stock market indexes were on pace for another session of massive declines last Friday. However, the bulls finally stepped in and aggressively propelled stocks higher in the final hour of trading. The S&P 500 finished the day 1.2% lower and the Dow Jones Industrial Average lost 1.5%, but that was much better than the respective losses of 7.7% and 8.1% the indices were showing at their intraday lows. The Nasdaq Composite fared even better by eking out a closing gain of 0.3%. Curiously, small-cap stocks showed massive relative strength, enabling the Russell 2000 Index to leap 4.7%. The S&P Midcap 400 Index ticked 0.2% higher. The S&P 500 and Dow Jones Industrial Average closed just above the middle of their intraday trading ranges, as the rest of the main stock market indexes finished in the upper third of their ranges.

The most notable facet of last Friday's trading was the frantic turnover. Total volume in the NYSE rocketed 52% above the previous day's level, while volume in the Nasdaq zoomed 41% higher. Despite the already brisk activity of recent weeks, turnover in both exchanges shot to the highest levels of the year last Friday, and also nearly doubled 50-day average volume levels. With just over 4 billion shares changing hands, the Nasdaq registered one of its most active days in history. This hectic pace of trading was bullish because it occurred as the major indices staged an impressive late-day reversal. Still, caution is required because there have been at least two other instances in recent weeks where stocks showed signs of "capitulation" by reversing on sharply higher volume, only to get slammed to new lows the following day. We can't say this time was different unless the stock market actually follows through to close with a solid session of gains today.

In the October 10, 2008 issue of The Wagner Daily, we used the long-term monthly chart of the S&P 500 to show how the index was quickly approaching major support of its year 2002 lows. Before the S&P 500 recovered into last Friday's close, the index had dropped to within just 3% (25 points) of its monthly closing low of September 2002. But those of you who trade futures contracts may have noticed that the E-mini S&P 500 (@ES), which trades continuously around the clock, actually did "undercut" its ultimate 2002 low before reversing into the stock market close. This is shown on the monthly chart below: