Market Falls on Rate Drop, but Quickly Recovers

Good morning! The afterhours climb following Tuesday's closing bell continued into the opening bell on Wednesday. When it rang, the Dow was already back at the price resistance from Tuesday's highs and the S&Ps were also dealing with the same resistance zone. The ES (S&P 500 EMini) chopped around in the 1542.5 level we were looking at for the first 45 minutes or do of the day. Volume was on the light side and continued to decline into the 14:15 Fed announcement. The lighter volume as the market corrected from the morning gap in the first 45 minutes or so, however, created a continued bias for more upside throughout the morning.

The indices rose steadily into 12:30 ET with only a 5 minute congestion zone at highs stalling the move from about 10:45 ET to 11:30 ET. It held the 5 minute 20 simple moving average throughout the ascent and found resistance eventually at the zone of prior highs in the Dow and S&Ps. A couple of stocks really did their best to outshine the overall market during this time. Newmont Mining Corp. (NEM) was a great example. It had tested a third high earlier in the week on the daily time frame and then formed a bear trap on the daily chart into Wednesday morning after it double its third quarter earnings. The result of the break from the range and the trapped bulls was an extreme continuation move out of the open that lasted into about 10:45 ET. Mastercard Inc. (MA) also took off on earnings, but it fell into a range out of the open and then broke higher around 11:00 ET. FXI, SIMO, SIRF, IVGN and ICON also took off strongly higher intraday in morning trading.



At 12:30 ET the market began to experience a greater divergence between the indices. The Dow formed a strong bull flag pattern into 13:00 ET and then broke higher into the Fed. The Nasdaq Composite, on the other hand, pulled more quickly lower into 13:00 ET and then based under the 5 minute 20 sma on light volume before breaking lower ahead of the Fed. The S&Ps fell in between the two and attempted, but did not quite hit, a retest of the intraday highs. It also broke lower prior to the lending rates announcement. The Dow never shook off its own 5 minute 20 sma and gave way to the pressure when the 14:15 news hit.



I'd been expecting the initial reaction to the Fed news, no matter what it was, to be on the downside and was not immediately disappointed in that bias, except for the fact that the market as a whole actually began to break lower before the news even hit that the Fed had lowered rates by the anticipated 1/4 point. The market fell as an initial reaction and then swung higher before selling off again. These three smaller waves became the first part of three larger ones.

At 14:30 ET the market began to reverse. This kicked off the second move on the 5 minute time frame. This counter-reaction to the initial news was much more pronounced that the initial move. As I mentioned yesterday, this is not at all unusual. The upside in the Nasdaq ended up being about twice that of the first downside move. The result was that when the market went for its third move it did not fall as hard. Instead the 5 minute 20 sma zone served as support. Even though the indices shown here all moved higher off the support, the market still held the 15:00 ET zone highs



By the end of the session on Thursday, the Dow ($DJI) had added 137.54 points and closed at 13,930.0. The S&P 500 (SPX) rose 18.36 points and closed at 1,549.38. The Nasdaq Composite ($COMPX) gained 42.41 points. It closed at 2,859.12, giving it the largest monthly gain among the three indices. It had risen 5.5% at the end of trading on Wednesday. As news continues to pour out in the form of earnings, my focus is going to remain on the premarket gainers and losers lists. There have been a lot of really nice gap plays this week and it seems reasonable to expect this to continue until earnings season begin to taper off.

Market Mixed Ahead of Fed

Good morning! I hope that you had a wonderful weekend! This week has been a bit tough in the overall market so far as folks weigh in on their feelings for Wednesday's upcoming FOMC interest rates release. Monday was a narrow range day in the market and while things widened up a bit on Tuesday, trading was still lighter than in recent weeks. The market had managed to post gains on Monday, primarily due to a nice upside gap into the open, but it took back those gains and more in yesterday's session in both the Dow Jones Industrial Average and S&P 500. The Dow ($DJI) fell 77.79 points and closed at 13,792.5. The S&P 500 ($SPX) lost 9.96 points and closed at 1,531.02. The Nasdaq Composite did manage to hold onto its gains thanks to continued strength in the tech sector. It closed virtually unchanged with a loss of 0.73 point to end the session at 2,816.71.



The action so far has been pretty typical of trading leading into a Fed day. Even on the top gainers and losers lists today many of the stocks leading the momentum moves were ones which tend to have wider spreads and choppier trading intraday. Although there were still some very nice setups throughout the session, I didn't have the best of luck locating many of the top leaders in time to catch the moves and ended up doing very little throughout the day. Apple (AAPL) led the gainers with news on sales for their latest operating system, while Dryships Inc (DRYS) completely fell apart after hitting new 52-week highs just one day earlier. It lost nearly $23/share to end the day at $108.00/share. Other top gainers included GOOG, SEPR, ATHR, SKS, and GT.



The indices began the session on Tuesday on a weak note. The market had gapped down a bit into the bell, but attempted to close the gap shortly thereafter. The Nasdaq accomplished the feat, but the Dow merely based out of the open at lows, while the S&Ps barely move higher before they again gave way to another round of selling. The decline mirrored the one in place from the gap after a slightly delayed reaction to the 10:00 ET consumer confidence data which has hit two-year lows.

The move lower out of 10:00 ET reversed off that equal move support and some congestion from the previous two days after only a couple of minutes. The S&P 500 and Dow both pulled up into the 5 minute 20 period simple moving averages for resistance at 11:00 ET, but the Nasdaq managed to make it into new intraday highs and the upper end of the range from the previous day. A gradual correction then followed as the market slid lower into noon. The volume declined further as the indices pulled up and then based into about 13:00 ET before finally gaining some upside momentum again after 13:00 ET to take the S&Ps and Dow back to morning highs and the Nasdaq to new 52 week highs in the afternoon.



The Dow and S&Ps could barely shake off the 5 minute 20 sma support as my inched higher. At the 14:00 ET reversal period the S&Ps came into resistance from Monday's afternoon lows and the indices then began to hug the lower trend line from the upside move. This lasted for about 15 minutes into 14:15 before the channel broke and the market pulled into its 5 minute 20 sma. The indices again hugged this next support for about an hour, managing a false upside breakout in the Nasdaq, before selling off strongly into the last 30-45 minutes of the day.

The late day drop took the indices into some strong price support from the prior 15 minute congestion and 15 minute 20 sma in the Nasdaq and prior lows in the S&Ps. Momentum shifted into the close and within a few hours the indices were triggering buy setups and moving higher in afterhours trading.

The upside we are seeing here in what is now the premarket is fairly typical of pre-Fed activity. The indices often move higher in the morning ahead of the announcement. Even when the market gaps down it will try to move higher off the downside gaps. There have been a lot more exceptions to this tendency in recent months, however, so it is not something I rely on completely for a morning bias. As the announcement approaches, however, volume dries up, as does the ability to locate lower risk intraday setups for trading. Noon tends to be the dividing point whereby the market begins its siesta. There is occassionally a decent directional bias during this period, but not that often.

Following the 2:15 ET FOMC announcement things become a bit crazy. It is highly advisable for most traders to just sit and wait out the initial reaction to the Fed news. There are usually 2 sets of three moves. The first is on the 1 minute time frame where there is a reaction, a counter-reaction, and then return to the bias of the initial reaction. This same set of actions then plays out again on the 5 minute time frame. The counter-move can be larger than the initial move. Support and resistance levels still hold very well on Fed days, but they can have a bit more "give" to them due to the momentum impact of such strong moves. I am looking at 1342-1342.5 for upside resistance initially, while 1530 is support in the ES (S&P 500 EMini).

There is a bit of a consensus that the Fed will lower rates another 25 basis points. I am learning a bit more heavily towards the camp that thinks they will leave the rates unchanged, but it doesn't really matter for a daytrade what the news it, but rather what the reaction itself is.

Market Action Video

Good morning! After several days off, I will begin the Daily Market Action letter on Wednesday. In the meantime, I have posted my new Weekly Action Video. Last week's video is available at http://www.tonihansen.com/marketactionvideo/ . Each week this link will also be updated. The location of the current video is http://www.tonihansen.com/MarketAction/20071028/20071028.html I hope you enjoy it!

All my best,
Toni

Apple Leads NASDAQ to New 52-Week Highs

Good morning! The market continued to shrug off Friday's losses on Tuesday. Apple (AAPL) rose 6.8% on the day after reporting a 67% increase in last quarter's earnings, while Amazon (AMZN) rose 10.4% ahead of its own upcoming earnings report due out after the bell. Research in Motion (RIMM) also rose sharply, posting nearly a 10% gain after taking off sharply mid-day on news that it would be selling its BlackBerry wireless devices in China. American Express (AXP) was another winner, gaining 3.2% after reporting an 11% increase in Q3 profits.

By the closing bell on Tuesday, the Nasdaq Composite ($COMPX) had risen 45.33 points, or 1.7%, ending the session at 2,799. The S&P 500 ($SPX) came in second with a gain or 13.26 points, or 0.9%. It closed at 1,519. The Dow Jones Industrial Average ($DJI) had the smallest percentage gain of +0.8%, but still tacked on over 100 points (+109.26 to be exact.) It closed at 13,676.

While news has certainly helped push the Nasdaq higher, leading it to new 52-week highs on Tuesday, the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) have risen to a lesser degree and are in line with the typical price reaction following a move such as on Friday. In other words, we've seen some upside in those indices, but nothing nearly as extreme as the earlier selling. It would now be normal to see some retracement again on Wednesday and the indices had a strong sell signal intraday heading into Friday's close which played out afterhours to already assist with part of that corrective bias.



The day began on a strong note on Tuesday. The indices gapped higher into the open thanks to continued upside after Monday's closing bell and early morning buying. The gap was right into resistance, however, from the congestion zone mid-day on Friday. I was expecting it to pull up into the middle of that range before it reacted to it, hence the 1528 level I posted in the ES (EMini S&P 500) as resistance, but it only made it into the lower end of that zone. The market actually rounded off at premarket highs into that level, so my bias as a whole was to the downside in the first half of the day with my first short taking place ahead of the open at 1522.5. It took awhile, however, for the bears to really take hold. The market fell into a range out of the open and it was not until the third test of intraday lows on the 5 minute time frame that the selling finally began to take over. This corresponded to the 10:45 ET - 11:00 ET reversal zones.

The Dow and S&Ps led the sellers into mid-day. They barely paused at the support from the gap closure and continued into a very strong test of their 15 minute 20 simple moving averages. At 11:30 ET the selling slowed and at 11:33 ET I had my first buy setup of the day in the NQ (EMini Nasdaq 100). The Dow and S&Ps rallied strong into the 5 minute 20 sma into noon, while the Nasdaq moved all the way back into the prior breakdown price level before stalling.



The market became very choppy once again into the early afternoon as volume dropped off a great deal. The indices crept higher until 14:00 ET. At that point the RIMM news hit. Since by this point the market had held the support for too long to favor a strong break lower, the bulls were given the freedom to rally once again. The S&Ps and Dow quickly moved back into the morning highs, while the Nasdaq was soon retesting last weeks highs. The Nasdaq hugged those highs while the S&Ps and Dow pulled back off 14:30 ET. When the last reversal period of the day hit at 15:30 ET it pushed the Nasdaq to new yearly highs and took the S&Ps and Dow to new intraday highs. The market was rounding off on the smaller time frames into the close, however, and, as I mentioned earlier, the sellers again took over afterhours.




For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or http://www.icechat.net. The room name is #mainstreet.

Market Shrugs Off Concerns, at Least Temporarily

Good morning! The market established a wide trading range in Monday's session after a sharp decline on Friday marked the 20th anniversary of Black Monday when the Dow fell 508 points in a single day. For those of you who checked out my Market Action Video in yesterday's newsletter, this response was not unexpected since the market had been selling off into Friday's decline and in the past such a move is typically unable to continue with a second strong day of selling. Some continuation early in the morning is not uncommon, however, and the market had sold off a great deal in afterhours trading. Even though the indices opened higher off those premarket lows, they still experienced a fairly strong downside gap to kick off the new week.



The gap in the market took it smack into the upper end of the congestion area from the price range of late August and early September. These upper price levels were also whole number support levels in the DIA and QQQQ, which are the index exchange traded funds for the Dow Jones Industrial Average and the Nasdaq Composite. It was the $134 level in the DIA and $52 level in the QQQQ. The selling into the previous day's close and the gap into Monday morning extended the trend move enough to allow the market to pull back up into the range from Friday, just as it had in nearly every single one of the examples covered in my video.

The morning gap filled very quickly in the indices and that zone served as resistance in both the S&P 500 and the Dow Jones Industrial Average. It hit at the same time as the 5 minute 20 simple moving average as well, providing additional resistance. The Nasdaq Composite, on the other hand, regained its relative strength lead and, while it stalled for a few minutes at its own 5 minute 20 sma, it was not long before it was at new intraday highs and back to testing the price resistance from Friday's mid-day congestion zone. These resistance levels struck with the onset of the 10:15 ET reversal period and selling once again took over. Most of the best short setups in individual stocks took place at this time.



While the mid-morning downside was decent and on the strong side, the rounded lows in the premarket and sharp upside out of the open were more significant and the market was pushed into a trading range with a second low coming out of the 11:00 ET reversal period. As the market initially moved off the 11:00 lows I was not certain we were going to actually end up holding our range very well without another wave of selling intraday first. The correction began gradually and with declining volume, but the momentum soon began to build and turn over before finally holding at 12:30 ET and again kicking off another wave of buying on the 5 minute time frames. The buying accelerated into 13:00 ET, creating an equal move on the 5 minute time frame which took the Nasdaq into the zone of the prior highs intraday as well.

After hitting resistance, the indices began to round off at the highs, establishing slightly higher highs, but without really breaking the resistance zone. The bulls finally gave way off 13:30 ET highs and fell into the 5 minute 20 sma support with the onset of the 14:00 ET reversal period. At this point the market based along the support zone on declining volume. This creased a strong Avalanche short pattern, which in this case was also an inverted cup-with-handle pattern. The selloff which followed too the market back into the mid-day congestion at 15:00 ET. It again slowed at this support, but it was not until around 15:30 ET that the buyers truly returned once again. This late day buy setup took the indices higher well into the closing bell and then beyond on afterhours trading.



By the closing bell the Dow Jones Industrial Average ($DJI) had gained 44.95 points (+0.3%) and closed at 13,567.0. The S&P 500 rose 5.70 points (+0.4%) anc closed at 1,506.33. The Nasdaq Composite experienced the strongest percentage gain by rising 1.1% (+28.77 points). It closed at 2,753.93. Apple Inc. (AAPL) was once again at the forefront of the gainers list, rising $3.94/share on Monday. Another gainer, Wynn Resorts (WYNN), will remain of upside interest throughout this week and has potential for an upside swingtrade. In the indices themselves, key resistance levels to watch for in the S&P 500 Emini futures contract will be the 1,528 zone. The 1540 level will also be strong resistance. In terms of support, look for the 1497 zone and then 1593.5. The chances are higher now, however, that the market will continue to react somewhat off this support and congest before it decides to either gain momentum or fall through the support and back into the congestion from mid-August.


For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or http://www.icechat.net. The room name is #mainstreet.

Market Panics and the Anniversary of Black Monday

NEW ADDITION: TONI'S MARKET OUTLOOK VIDEO OF THE WEEK:

Good morning!!! Beginning this week I will be adding a new feature to my site: an audio/video look at the market focusing on several aspects of the current market's development and upcoming expectations based upon the market's current action. You can view today's video at http://www.tonihansen.com/marketactionvideo/

I hope that you enjoy it!!!!

All my best,
Toni Hansen
_____________________________________________________________________

Market Panics and the Anniversary of Black Monday

Good morning! The market took quite a plunge on Friday on the 20th anniversary of Black Monday after teasing about such a move for several weeks. On both Wednesday and the previous Thursday the markets had experienced sharp intraday selloffs, but in both cases the indices managed to recover rather well. On Friday, however, the downside pace increased dramatically and key daily support levels gave way. The Dow Jones Industrial Average led the decliners by rounding off at the daily highs over the course of the past several weeks and then slowly beginning to sell off with last Thursday's steep reversal. At the same time, the Nasdaq Composite had managed to hang onto most of its gains and base at highs, but it was unable to sustain any of the intraday momentum on the upside. Even though it continued to hold the 20 day simple moving average support into Friday, it has broken the uptrend channel line from the buying which had been in place since mid-August.



Heading into Friday's session, things became rather dismal early on. The 1540 level in the ES, which was the initial 15 minute support zone, broke around 9:00 am ET, just prior to the open. Then it fell into the 1536 zone, which was the second support level we were looking for heading into the day. This zone held initially for a couple of minutes, but the momentum into the support level was simply too strong and it soon gave way to more selling. The continuation pushed the Dow and S&Ps through Wednesday's lows to trigger a larger short setup on the daily time frame. The Nasdaq, which had held up a lot better overall had found initial support at Thursday's lows, but as the Dow and S&Ps moved to new lows on the week, the Nasdaq fell into the lows made earlier in the week and that support helped stall the price decline into noon.



It was 11:00 ET when the market pivoted off mid-day support initially. The Nasdaq held this level, but the weaker S&Ps and Dow managed a very slightly lower low into 11:30 ET. A pull off those lows created a form of double bottom trap called a 2B. The Nasdaq also formed a bullish pattern on the 5 minute time frame. In this case it is a pattern I termed the Phoenix, although in this case it didn't rise very far from the ashes before it got a bit scorched again! The market rounded off at mid-day highs, just under the 15 minute 20 simple moving average, and by 13:00 ET the bears had already begun taking charge once again. The afternoon trading was smooth to begin with, but as panic set in the action became a lot more choppy and volatile.



Although the Dow did not quite hit the -508 point loss of Black Monday, it gave it a shot in terms of the absolute point value of Friday's decline. Alll 30 of its index components closed in the red. The Dow closed lower by -366.94 points (-2.6%) on Friday at 13,500.02. It's biggest loser was 3M (MMM), which lost 8.6%. Of course, in today's market, the drop of 20 years ago would have had to have been about 3,000 points to truly compare, so we still faired well in that regard! Meanwhile, the S&P 500 fell 39.45 points (-2.6%) and closed at 1,500.63 on Friday and the Nasdaq Composite also lost 2.6%. In terms of points, this amounted to a 74.15 point drop. It ended the day at 2,725.16.

As we head into the new week, this bearish phase of the market looms. In the past, most days which are led by selling and then experience a sharp decline such as this will recover to some extent into the next session. There are exceptions though, such as July 13th and 14th of 2006 where the Dow had begun to sell off just over a week earlier but then accelerated coming out of a downside gap on the 13th. The session closed nearly lows and then went on into the prior daily low in the next session. In the Dow Jones mini-futures this amounts to the 13200 to 13400 zone and 1450 to 1475 in the S&Ps, which is a rather large range. The lower end of that support zone will tend to be the strongest. I believe that we can see one more wave of upside on the weekly time frame, however, before this larger uptrend really reverses. Should the market correct off support, the 1525 level would be S&P Emini resistance. Right now that is not looking too likely though!

For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or http://www.icechat.net. The room name is #mainstreet.





Economic Reports and Events This Week

Monday, October 22, 2007
8:30a.m. Sep Chicago Fed Natl Activity Index. Previous: -0.57.

Tuesday, October 23, 2007
7:45a.m. ICSC Chain Store Sales Index For Oct 20. Previous: +1.0%.
8:55a.m. Redbook Retail Sales Index For Oct 20. Previous: +1.0%.
10:00a.m. Oct Richmond Fed Manufacturing Index. Previous: 14.
5:00p.m. ABC/Wash Post Consumer Conf For Oct 21. Previous: -13.

Wednesday, October 24, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: -1.1%.
10:00a.m. Sep Existing Home Sales. Previous: -4.3%.

Thursday, October 25, 2007
8:30a.m. Initial Jobless Claims For Oct 20 Week. Previous: +28K.
8:30a.m. Sep Durable Goods Orders. Previous: -4.9%.
10:00a.m. Sep New Home Sales. Previous: -8.3%.
10:00a.m. Sep Help-Wanted Index. Previous: 23.
10:00a.m. DJ-BTMU Business Barometer For Oct 6. Previous: -0.3%.
11:00a.m. Oct Kansas City Fed Mfg Index. Previous: 4.

Friday, October 26, 2007
10:00a.m. End-Oct Reuters/U Of Mich Sentiment Index.


Key Earnings Announcements This Week:

Monday:
Before: ASTE, AUO, BOH, CRNT, CHKP, ECL, GNTX, HAL, HAS, JAKK, KMB, MRK, PETS, PVTB, RGS, RCL, GSP, VECO, WFT, ZBRA
After: ALB, AXP, AMIS, APOL, AAPL, BRO, BKI, CR, DSCM, DST, EXP, EW, EFX, RE, XJT, FWRD, HXL, HUBG, JDAS, KRC, LNCR, NFLX, OMI, PTV, PRE, PCL, PLXT, RGA, SLG, TCO, TXN, TNB, TSS, UCTT, VLTR, BER, WNC, ZRAN

Tuesday:
Before: FLWS, AKS, ALDN, AXE, AIT, ARW, ARTG, T, AVY, BKUNA, BIIB, EAT, BNI, CE, CNC, CNH, COH, CMCO, CBE, DD, ELON, FMER, ICLR, IHP, IIVI, JBLU, JCI, JRN, KELYA, KCI, LAB, LVLT, LXK, LMT, MDU, MICC, MNRO, NYT, OMC, OXPS, PCAR, PNR, PTEC, PCP, PRSP, RDWR, RYN, ROH, SAY, POOL, SHW, SII, STFC, TROW, AMTD, TLAB, TNC, TRAD, UAUA, UIS, USAP, UPS, USG, WDR, WAT, WU, WHR, WTNY, WRLLD, XTO
During: TZOO
After: ACE, AFL, AMZN, AMSG, ANAD, AJG, BRCM, BTUI, CHRW, BCR, CLMS, CLZR, CRI, CSCD, CEC, CTX, CAKE, CB, CNW, CSGS, CTS, CYMI, DDUP, DFG, EFII, WIRE, ENTU, EPIC, EPIQ, EEFT, FLEX, GSIG, HLIT, HOKU, ILMN, INGN, JNPR, LDIS, MANH, MCHP, NBR, NARA, NVLS, ORLY, PNRA, PFWD, PLT, PTP, PPDI, QLGC, RJET, RFMD, RVBD, SEAB, SBCF, SIAL, STM, SUPX, SWN, TRMB, TRMK, TUP, VOCS, XL

Wednesday:
Before: AMG, APD, ATI, ABK, AEP, ABI, ACAT, ASPM, ATMI, AN, BA, BOBJ, CACH, CSL, CRA, CPS, CBR, CME, CCE, COP, GLW, CFR, DAI, DOV, ETH, FCX, GD, GENZ, HSC, KEM, KMT, LM, LII, MPX, MDP, MER, MLAN, MCO, MSM, NDAQ, NCC, NOV, NSC, OXY, PAS, PFCB, PRAI, PX, DGX, RAI, RES, R, SEE, SLAB, SNA, SWK, TASR, TIN, MDCO, TRB, UNF, WAB, WLP
During: BUD, EGN
After: RNT, ABAX, ACXM, AEIS, ADVS, AFFX, AEM, ARG, AKAM, ACL, ALGN. ACLI, ACF, AGP, ARRS, BBSI, BXP, CDNS, CLDN, CRUS, CPWR, CLB, EXBD, CSGP, CVD, CVA, EGP, ESIO, ESRX, EXTR, FFIV, FNF, FIS, FADV, FR, FISV, FORM, GDI, GGG, GRP, GSIC, HPC, IBKC, IGTE, INSU, IDTI, ICO, IRBT, KEX, LOOP, LSI, LMNX, MTSN, MSC, MRCY, MEOH, MCRI, MNST, MRH, MUR, NETL, NTRI, NUVA, OI, PRXL, PCTI, PNSN, PXLW, PSSI, PHM,QTM, STR, QDEL, RRC, RCRC, RNOW, RYL, SGMO, SCSS, SMDI, SSCC, SFG, STAR, STTS, SYMC, SMMX, TEX, TLGD, TSCO, TQNT, TGI, TYL, VAR, WOOF, WSTL, WSH, ZL, ZMH

Thursday:
Before: ACPW, EYE, AET, ATG, ALK, ACV, ALXN, AMED, APA, ARQL, AGIX, ALV, AVT, AVX, BLL, BLDP, BDC, BLC, BHE, BDK, BKHM, BWA, BOW, BMY, BW, BG, CCMP, CRR, CBZ, CCBL, CDI, CELG, CEN, CXG, CMCSA, CNMD, CNX, COT, CVTI, CMI, DLX, DO, DRAD, DTG, DDE, DVD, DOW, DEP, ELNK, ELN, EMC, EME, ECA, ENDP, ESV, EPD, EQT, EL, SSP, FCSX, FSS, FLIR, BEN, GMT, GGL, GR, GHL, HBI, HET, HHS, HCR, HTV, HMC, HUB.B, HUN, ICTG, IKN, IMN, IMCL, IPCC, IDC, ESI, JNS, KSU, KEYS, FSTR, LLL, LH, LMS, LTM, LIFC, LECO, LIZ, LKQX, ERIC, LYTS, LYO, MGLN, MATR, MBI, MWV, MEDE, MSTR, MEH, MKSI, MOT, MPS, NWL, NFX, NIHD, CHUX, OMX, ODFL, ORI, OFIX, OVRL, PTIE, PMTI, PTI, PCCC, PENN, PCZ, PNW, PLUG, POT, PCH, PDS, PLD, QLTI, RHD, RSH, RJF, RTN, RGC, RTIC, RESP, ROK, SFUN, SEIC, SIFY, SLGN, SPIL, SO, SPAR, HOT, SU, SY, SNV, SYNT, SYPR, TSM, TDY, TRA, TMO, TSCM, TOC, TBL, TKR, TRV, UMC, LCC, UST, VDSI, VIGN, WMAR, WHQ, WEC, WWY, XEL, XMSR
During: PPP, TOMO
After: AEA, AYE, ACAP, AMGM, ANAN, AMCC, APLX, ARBA, ARTC, ASIA, AZPN, AVID, BIDU, BEZ, BJRI, EPAY, BFAM, BPL, BLDR, BLG, COG, CALD, CSH, POS, CLS, CX, CENX, CF, CTHR, CKFR, CLF, CNET, COHU, COLM, CVGI, CTV, DVW, CCI, CW, CYTC, DECK. DV, DRIV, DBTK, DDR, BOOM, EMN, ELX, ESLR, FALC, FII, FCTR, FMD, FDRY, FRNT, GNW, HAR, HIG, HITT, IKAN, IM, ISSI, IBKR, ITMN, XXIA, KCP, KLAC, LDSH, LFL, LSCC, LPNT, LAD, LAVA, MEE, MFE, WFR, MMSI, MCRL, MCRS, MSFT, MTX, MOBE, MRK, NATI, NTGR, NTCT, NEXT, EGOV, NINE, NVTL, ORCC, OPWV, OPLK, OSIP, PSEM, PKI, PYX, POWI, PWER, PSYS, RACK, RADS, RADN, ROP, RRR, SCSC, CKH, SIGI, SWIR, SKX, SNCI, STMP, SPF, STNR, SRCL, SNCR, TNL, TTEC, TRID, TMWD, ULTI, UNTD, VSEA, EICU, VPRT, VVUS, WEN, GB, YRCW, ZIGO

Friday:
Before: CAS, ALEX, ALE, ABFS, BHI, BC, CCUR, CVG, CFC, CVH, EXC, FO, HMA, IDXX, IR, ITT, KIM, LZ, LABL, SAIA, TDW, THO, WI, WMI
After: BVN, MTH

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Nasdaq Leads, but Dow and S&Ps Refuse to Follow

Good morning! It comes as no surprise that on Thursday trading was again mixed as the daily range continued. The Dow Jones Industrial Average ($DJI) fell 3.58 points to close at 13,889.0. American Express Co. (AXP) was one of the top losers, falling 2.4%. The S&P 500 ($SPX) also lost a bit of ground, dropping 1.16 points. It closed at 1,540.08. A large factor in the NYSE underperforming has been the returning weakness in the financial sector. Citigroup Inc. (C) fell another 1.9%, while Bank of America (BAC) lost 2.4% The Nasdaq Composite ($COMPX), on the other hand, posted a gain of 6.64 points, or +0.2%. It ended the day at 2,799.31. In other markets, the dollar sunk to to record lows against the euro, down 0.7% at 77.595.



Thursday was interesting in that even though the market spent most of the day in a narrowing triangle pattern on the 15 minute time frame, there were still a lot of strong names to provide ample opportunities for stock traders. Callaway Golf Co. (ELY) was one of three stocks I focused on in Thursday's session. Early in the day it had a strong breakout from the range at $16.50 and from that point onward it was a steady climb to my target at $17.50. The daily pattern was a trap, whereby the stock had gapped significantly higher after a close near the day's lows on Wednesday, hence trapping the bears since a weekly short pattern had just triggered three days earlier. My other positions were CSX Corp. (CSX), which I'd had since the previous day, and Baxter Intl Inc. (BAX), which was another trap pattern plus a daily range breakout, which also went strongly into the $61 target I had set. If you get a chance to pull up the daily charts on each ot these you will notice how the gaps played a significant roll in their success, ELY and BAX based upon Wednesday's gap and CSX based upon the gap the day before. Even when simply daytrading a stock, it is very important to pay attention to where the intraday setup takes place on the daily time frame to offer the highest probability for success.



The indices themselves, while sloppy on the 15 minute time frames, still had some strong scalp setups which made it active throughout the day. Ahead of the open, the jobless claims data hit the wired. A 28,000 increase in claims made it the largest since February. Those collecting state unemployment benefits rose by 19,000 in the week ending on Oct. 6th. The morning began with a slight downside gap, but it opened at support, creating a bit of a base or congestion zone before triggering a short coming out of the 9:15 ET reversal period. This initial move lower intraday then took the indices into what would become the lower end of the intraday trading range at about 10:00 ET. Momentum slowed and the Nasdaq found support at its 15 minute 20 simple moving average at this time and the 10:00 ET economic data helped provide a bit of a boost. The Conference Board stated that its index of leading economic indicators rose 0.3% in September. While slow, growth remained steady and the market quickly moved higher, attempting to close the morning gap. It fell just a tad bit short in the Nasdaq and S&Ps, but accomplished the feat in the Dow.



The morning trading gave some solid back and forth moves, particularly in the Nasdaq, which experienced the least amount of overlap from bar to bar and the clearest setups. The gap zone was strong resistance on the 5 minute time frame and the market fell off that level. It then formed a base for about 30 minutes along the 5 minute 20 sma zone before triggering an Avalanche short setup into the 11:00 ET reversal period. After that the momentum began to turn. I took another continuation short in the Dow into noon, but the Nasdaq was forming a Phoenix at the same time. Hence I ended up treating it as a scalp.

The market began to climb again going into 12:30 ET, but the pace was still on the slower side. I took another scalp off the upper resistance in the Dow into the 13:00 ET reversal period thinking that the slower momentum would create another flush lower, but got out just in the nick of time at 13:11 ET when the volume failed to confirm, wondering at the time if I was being too aggressive. One tick lower, however, was all the YM had before it triggered a momentum reversal and shot higher at about 13:15 ET.

The Nasdaq stalled for a couple of minutes at the intraday highs just after 13:30 ET, but that was the only continuation pattern it offered before rallying to new highs on the week. The S&P 500 and Dow formed a nice three-wave trend with one continuation at about 13:30 ET and a second just prior to 13:00 ET. Both indices held resistance perfectly from morning highs and then the previous afternoon highs. While the indices had a steady reversal off the upper resistance and trend exhaustion, once support hit at the 15 minute 20 sma in the Dow and S&Ps and the 5 minute 20 sma in the Nasdaq at about 15:00 ET, that was it. There was an initial reaction off the support, but the remainder of the session was incredibly sloppy and I ended up calling it a day a bit early to avoid the mess.

The upside pattern from Thursday afternoon left room still for the market to continue higher into Friday. Unfortunately, a lot of this movement came soon after 4:00 am ET in the premarket trading. It took the Nasdaq into its measured move level between 2215-2220 in the NQ, but I was looking for the 1555 level in the ES. Due to a strong decline in that index afterhours, it has only made it back to the 1544 zone afterhours and upside resistance on the 15 minute time frame is now at 1547 if it can manage to break higher out of this new range it has been forming at premarket highs in the 1541-1542 zone. 1540 and 1536 are the main 15 minute support levels. On the daily time frame there has not been much change. The range remains in tact in the Dow and S&Ps, while the Nasdaq broke more quickly as I had suggested when we first began to see the range form.

Market Scared of its Own Shadow

Good morning! I have this cat named Bonnie, but from the time she was a kitten she earned the nickname "Boo", which she now thinks is her actual name. She received this name because she is afraid of everything! Everything, that is, except what cats are supposed to be scared of! Vacuum cleaners, water, hyper-active 3 year olds don't faze her, but if she sees a nail file she will freak out. The same thing happens if a gust of wind fluffs her fur the wrong way or a book is laying on the counter that wasn't there before. She will jump halfway to the ceiling from standing position, which is quite a feat given our high ceilings. Lately, the market reminds me exactly of my cat. It has brushed aside poor news or lack-luster news, but if you so much as look at it the wrong way it freaks out. This happened last Thursday when late-day panic left many scrambling to find the news, when there was none to be had. The same thing happened again in Wednesday's session.




The session began on a happy note, following through in the afterhours trading on the bullish bias we saw heading into the close on Tuesday. Unfortunately, the gap into the open was much larger than average, and hence more difficult to hold. Typically the extreme gaps in the indices themselves have a greater tendency to fill. It did not help that the gap was also into strong price resistance. This came at Monday's opening levels in the Nasdaq Composite ($COMPX) and the closing highs from Monday in the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI).

Right away out of the open the bears took over. The momentum on the downside was pretty decent initially, slowing as the 5 minute 20 simple moving average approached in the Dow. An area of congestion followed and then led to a second wave of intraday selling into the 10:45 ET reversal period. This corresponded to the 5 minute 20 sma in the Nasdaq and the market began to correct again off support. The Nasdaq held, but the Dow and S&Ps established a slightly lower low just after 11:00 ET before they joined the Nasdaq in correcting off the support zone. The slightly lower lows brought them into stronger support due to the 15 minute 20 sma.



The indices slowly climbed into noon, but volume sharply declined, indicating a lack of conviction on the upside move. When the 12:00 ET reversal period hit the volume was at its lightest levels of the entire session. At the same time, the market was hitting strong price resistance from previous congestion on the 5 minute charts in the S&Ps to the previous highs in the Nasdaq. The result was a very rapid return of the bears once the lower end of the trend channel gave way. The volume had been so light just prior to the breakdown that it took very little for the market to create its strongest momentum move of the session thus far.

Within half an hour the S&P 500 had closed its morning gap, the Nasdaq had fallen into its 15 minute 20 sma, and the Dow was hitting the previous afternoon's lows. All of these support levels led to a minor correction, but the market just hugged the support on light volume again and when the 13:00 ET reversal period hit the market rapidly plummeted to new intraday lows.

The second strong wave of selling in the afternoon finally took the Nasdaq back into its closing prices from Tuesday. This was another strong level of support, much as it had been on the S&Ps and Dow. As in the S&P and Dow, however, the momentum into the support was extreme, which meant that any rapid correction off the support level was unlikely. Since we only had two waves of selling, it also meant that the market still had room for a third wave of downside. Volume did spike coming off the second low, but it dropped again as it corrected. When the upper end of the downtrend channel hit it kicked off that third decline, taking the Nasdaq back into Tuesday's lows and yet another very strong 15 minute support zone.



At 14:00 ET the Fed's Beige Book came out. 14:00 ET is typically a reversal period to begin with, but combined with the strong market support and the trend exhaustion, it came at a very pivotal time for the market. The indices popped and then based into about 14:30 ET. Volume was light on the more gradual pullback off the 5 minute 20 sma zone. The momentum again increased as the resistance gave way and when the 15:00 ET reversal period hit the market took off. Within only about 15 minutes the indices were back to their 13:00 ET breakdown prices. This served as resistance, but a small correction was all it took before the market again shot higher into the close.

The market closed with a 20.40 point loss (-0.1%) in the Dow Jones Ind., a gain of 2.71 points (+0.2%) in the S&P 500, and a gain of 28.76 (+1.0%) in the Nasdaq Comp. The buying then continued afterhours and the S&Ps and Dow flew into their 12:00 ET price resistance, while the Nasdaq continued into its premarket highs before stalling and falling into a congestion heading into the next day.

It is still going to be easier for the Nasdaq, which has held up very well thanks to technology stocks lately, to break to new daily highs. Meanwhile the S&Ps and Dow have more significant resistance at last week's highs. Due to earnings season and a great deal of uncertainty in the markets, moves such as Monday's and Wednesday's are likely to occur on a much more frequent basis right now than we have seen in the last 6 weeks. I am also now suspecting that by the time earnings season begins to wind down we will once again be experiencing another larger correction on the weekly time from in the overall market.

Markets Continued to Slide Lower, but Lacked Conviction

Good morning! Trading was very choppy throughout much of Tuesday's session. After continuing to move higher afterhours on Monday, the market ran into price resistance. In the Nasdaq Composite this resistance was the price congestion zone at noon before the indices dropped lower into the early afternoon. The market was unable to push past those highs and at almost exactly midnight the bears returned with a sharp decline in the wee hours of the morning. At 4:00 am ET the indices began to stabilize, but the market bias remained mixed. The rounded lows on Monday's 15 minute charts left a bullish bias in the market that, despite afterhours buying, had yet to play out long enough for any real bearish action to take over.



The bears tried to regain control out of the opening bell, pulling the indices lower for the first 15 minutes of the regular trading day, but the 9:45 ET reversal period held and the market turned higher. The Nasdaq led the upside, nearly closing the morning gap, whereas the S&Ps and Dow could not even push through the 5 minute 20 simple moving average resistance. A second wave of intraday selling followed this resistance and the market fell sharply into 10:15 ET where it rounded off into 10:45 ET, triggering another upside move into 11:00 ET.

For a brief span of time, the bulls were allowed to try their luck once again, but they were forced to deal with a horde of resistance levels. The 5 minute sma was again the first one for the Dow and S&Ps, whereas the Nasdaq moved into its upper channel resistance at the same time. The indices hugged the resistance into about 11:30 ET and then broke to continue higher on a second wave of buying. The Nasdaq once again hit premarket highs and the mid-day congestion from the previous session before turning over, while the S&Ps found resistance at those mid-day lows and the Dow found intraday resistance at the earlier 5 minute highs.



The early afternoon action in the indices was still not too difficult yet. The mid-day resistance held perfectly and the selloff which followed moved perfectly into support from the 11:15 ET zone and then formed a nice little Avalanche on the 5 minute charts before falling again into the 13:00 ET reversal period. This took the market into the 10:30 ET price zone and a second level of 5 minute support.

After the market reversed at about 13:15 ET and again headed higher, the indecision became magnified. Among the first of the major earnings announcement of the season, Yahoo (YHOO) was set to announce their results after the closing bell. As I pointed out in my free chatroom, while the 5 minute bias remained bearish, the 15 minute charts were still bullish! In the end both of these biases had a chance to play out, although the bulls had to wait until after the closing bell. At about 14:15 ET the bears took over and brought the market back to prior 5 minute lows, but it lacked the interest (as displayed by very little change in volume) to break the support level.

A slightly lower low formed soon after 15:00 ET, but the lower intraday support held. This created a reversal pattern in the indices known as a 2B. I had hoped to see a third slightly lower lows to flush things out a bit better, but instead the market rolled over and then popped to the upper end of the trading channel. It then held up along that resistance until after the bell when earnings announcements propelled the indices higher. The Dow and S&Ps returned to their opening price levels and the Nasdaq managed a higher high on the day.




At the time of the closing bell, the Dow Jones Industrial Average was down 71.86 points (-0.5%) after hitting a triple digit loss earlier in the session. The Dow ended the day at 13,912.90. The S&P 500 fell 10.18 points (-0.7%) and closed at 1,538.53. The Nasdaq Composite came in in the middle with a loss of 16.14 points, (-0.6%). It closed at 2,763.9.

A lot of the top winners on Tuesday were under $15/share. Bell Microproducts Inc. (BELM) rose 8.4%, breaking out of a second wave of selling on the daily time frame after stating that on a preliminary basis, Q3 revenue was up about 30% from the prior year. China Precision Steel Inc. (CPSL) rose 9.9% after it showed a 55% revenue growth for fiscal 2007. Lululemon Athletica Inc. (LULU) had a really great daily setup with a strong bear trap after it raised its Q3 same sales growth target to over 30%. Another very strong setup on the daily charts was in Robbins & Myers Inc. (RBN), which had originally triggered on Monday, but then offered a strong continuation play on Tuesday morning thanks to a strong base at highs following the opening gap. The gap itself was caused by earnings for its fiscal Q4 which were nearly double from the prior year.

On the losing side, one of the stronger daily and weekly short setups was on Domino's Pizza (DPZ). It had been stuck in a range since August and fell through the lower end of the range with a gap due to a Q3 net income decline of 55%. A similar setup occurred in Keycorp (KEY), which also broke lower out of a weekly base at lows after its Q3 income fell 33%. Both of these are now open for even further downside as a result.

The intraday momentum is still more bullish because the upside moves within this congestion have been very strong, even though they have been afterhours. The daily charts, however, remain more extended, which still makes it easier for the bears to take hold quickly if the momentum turns over intraday. I think that this week the easiest trading is going to be in individual stocks moving on earnings news while the overall market remains choppy.

Market Experiences Strong Selling as Range Holds

Good morning! The market has fallen into a decent corrective stage on the daily time frame as the week begins. The indices whipped strongly back and forth at the end of last week, and then reversed a third time on Monday after rounding off at all session highs heading into the day to trigger a short almost immediately following the open despite a minor gap higher. This went contrary to what I had been expecting the previous evening since I was originally looking for strength into the morning and had to change my bias rather quickly. The Nasdaq held up the best to begin with, finding support at the 5 minute 20 simple moving average while the Dow Jones Ind. Ave. and S&P 500 dropped right through them, but after congesting along the support for about half an hour the indices had all formed Avalanche continuation patterns and the next level of support gave way to further selling.



The downside move out of about 10:30 ET was the strongest move of the day on Monday. Selling continued until the Dow and the S&Ps had both made their way back into Thursday's afternoon lows. This served as support initially, but the momentum into the support level was too strong to allow the indices to rapidly retrace. Instead they fell into trading ranges along the support and volume dried up as the 5 minute 20 sma approached. This previous support level now served as resistance and the indices broke down again into 12:30 ET. The market moved to lower lows but did not break by as much as the previous selloff.



Soon after 13:00 Et the market bounced again. This time the momentum was a bit stronger, but the 5 minute 20 sma remained resistance. It was the beginning of a momentum change, however, and the indices continued to round off at lows with only slightly lower lows before popping higher into the close in the final 30 minutes of trading on a 15 minute momentum reversal pattern. The upside took the market through the 15 minute 20 sma resistance, but it was not enough to hold off the bears in afterhours trading and selling resumed to kick off Tuesday's premarket trading at mid-night.



Monday session ended with a loss of 108.28 points in the Dow ($DJI) for a closing price of 13,984.80. The S&P 500 ($SPX) lowest 13.09 points and closed at 1,548.71. The Nasdaq Composite ($COMPX) lost 0.01% more than each of the other two indices, falling 25.63 points and closing at 2,780.05. Oil-related stocks were among the strongest, while General Motors (GM) was one of the weakest. I had expected Monday's closing prices to be followed by a lot more upside that ocurred. I think it is still possible that this can come in for the morning, however, and my bias is again bullish in the morning but the prior highs from Thursday remain very strong resistance.

Signs a High is Near

Response to a comment question posted on Oct. 2.

Some signs a high is near:

- highs begin to break by a lesser degree than before... for instance if it breaks by 15 cents, then by 8 cents and then by 2 cents, one can expect a reversal as likely

- if there have been three waves of buying whereby the two pullbacks between the upside moves are comparable in terms of time development

- if volume was strong on the buying initially, but is now dropping with each new high

- if the momentum is slowing with each upside move... such as one move taking 30 minutes to move 10 ticks, then it take another 30 minutes to move up only 6 ticks, etc...

Who Should Trade, Who Shouldn't???

Another email question....

> I wanted to ask you if you think there are any group of people who should
> not take up trading at all? What about people with addictive
> personalities? I have read some articles by Dr. Van Tharpe in which he
> says certain people should not take up trading, would you agree or
> disagree with that? I know that Richard Dennis formed a group of traders
> called the Turtles on a bet with his co-worker who said traders could not
> be taught it was something that some people had and others didn't. Richard
> Dennis of course went on to prove that traders could be taught. Since
> there are a lot of emotions involved when money is at risk, it seems that
> some personalites would have a harder time that others. Thanks for your
> time.


Hello ----,

Yes, there are many people that should not take up trading, or whom will at least have a much more difficult time succeeding than others...

For instance, if you have a young family and very little savings, and hoping to earn a living quickly, then you should not trade.

If you have to borrow money to start trading, then you should not trade.

If you are bipolar, you should not trade.

If you cannot handle risks without feeling or resembling 50 women with pms or menopause all wrapped up into one person every time you place a trade, then you should not trade.

If you are a gambler, you might make the perfect trader, as long as you manage your risk and know how to let your winners run.

Yes, average traders can be taught to make a decent living and be successful in this field, but to be an exceptional trader you must have something special and a command over your emotions and risk tolerance in a way that most people will never be able to master no matter how much teaching or mentoring they receive.

All my best,
Toni

"Toni, why to you run a website, etc.?"

Here is a question I received via email:


> I am considering getting back into trading. As you have mentioned, I was
> one of the new traders who started out doing very well, only to pay a
> steep "tuition" later, thinking I was better than I was. I used to listen
> to you and Brandon a lot.
>
> Anyway, my question is this. If you are a successful trader, why do all
> this? The website, the blog, emails all of it. Why not just trade?
>
> There is the old saying, "Those that can, do. Those that can't teach."
> or something like that.

Hello ----,

Why do I do it? Why not?

I started doing the site because another site asked me to and was willing to pay me for work I was already doing for free... Didn't take a genius to decide what to do! Extra income takes the pressure off needing to perform each and every month in the market. It certainly doesn't hurt! If you notice, however, most of the things I do I simply give away and those I do charge for are at a substantial discount as compared to the industry norm and the quality of the information is substantially higher.

Additionally, I like to do it. It's nice having recognition for my skills. All that remains of us once we are gone from this world are the impressions we have left in the memories of others and those whose lives we impact while we are here. If I am holed up in my office just talking to my cat all day... what is the point of what? My cat could care less... Well, I should not say that... She would prefer to have my attention instead of the computer...

Regarding... "Those who can, do... Those who can't, teach." What a silly statement. It has to be one the of the worst fallacies on earth. I have very few "heroes", but all of me heroes were teachers.... including my mother. Without teaching others, a person must be very selfish indeed...

So, why do I do them? To me, there is no compelling reason why not to and all the right reasons to do so.

All my best,
Toni Hansen

Market Recovers Sizable Losses

Good morning! The market made quite a recovery on Friday after selling off sharply in the previous session. Given the extent of Thursday's decline, it was rather remarkable that the overall market still managed to post gains for the week as a whole. By the end of Friday's session, the Dow Jones Industrial Average ($DJI) had reclaimed 77.96 points (+0.6%) from the previous day's losses to end the session at 13,093.1. The gain on the week amounted to +0.2%. The S&P 500 ($SPX) took back 7.39 points (+0.5%), adding 0.5% to the week with a closing price on Friday of 1,561.80. The Nasdaq Composite Index ($COMPX), led by strength in the technology sector, rose 33.48 points on Friday (+1.2%) and added 0.9% on the week by closing at 2,805.68.

Despite the gains, however, the upside volume in the market was rather light compared to the past several months. On Friday volume on the New York Stock Exchange came in at about 1 billion shares. Advancers outpaced decliners by 5 to 3. On the Nasdaq a little under 2 billion shares exchanged hands and advancers beat out decliners by 9 to 5. Since Friday was a trend day with primarily higher highs and higher lows, this showed a bit of hesitation. The fact that the trend weakened dramatically as the day wore on, as we will soon see, also made it more difficult for the bulls, although they refused to give way to another afternoon of selling and finished strongly.

Several economic reports were released on Friday which played a bit of a roll in the intraday trading activity. The first, and most influential, of these ws the 8:30 ET producer price data. The Labor Department reported at this time that U.S. producer prices climbed by a greater-than-expected 1.1% in September, while core inflation increased 0.1%. This meant that the greatest gains were in higher energy and food prices. The overall PPI increase was the largest since this past February with energy prices moving higher by 4.1% last month and wholesale gasoline prices jumping 8.4%. Food prices rose by 1.5%. One the the areas where prices declined was when it came to passenger car prices, which dropped 1.8%.

At the same time as the PPI data was released, so was additional data on September retail and food sales. U.S. retail sales rose 0.6% in September, beating expectations of a 0.3% increase and putting a damper on expectations for aggressive rate cuts on the part of the Federal Reserve. The result was that the Treasury bonds fell on Friday, sending yields higher. The 10-year Treasury bond fell 11/32 to 100 17/32, yielding 4.683%. The 30-year bond shed 21/32 to end the session at 101 14/32 with a yield of 4.908%.

Additional data released later in the session showed a 0.5% increase in retail inventories as reported by the Commerce Department. On the other hand, Reuters and the University of Michigan reported a drop in consumer sentiment from 83.4 in September to 83 this month, whereas analysts had expected the consumer confidence rating to climb to 84.5. This is the lowest it has been since August of 2006 and reflects concerns over the rising food and higher energy costs in particular.



After just chopping around in the premarket and going virtually nowhere, the indices began to move higher following the 8:30 ET data. While the Dow and S&Ps stalled out of the open, however, after just a few minutes of indecision the Nasdaq was making its way higher. The Dow and S&Ps joined in following the 10:00 ET data and the market continued higher into the 10:15 ET area. The Nasdaq had a bit more trouble pulling back off the highs, but all three indices made their way into the 5 minute 20 period simple moving average zone on declining volume. It hit at about the 10:45 ET reversal period and by 11:00 ET the market was again moving higher.



As the morning progressed, the indices hit higher highs intraday. This continued until the S&Ps hit Wednesday morning highs around 11:30 ET. A second correction on the 5 minute time frame followed into noon. The selling on this second pullback was a bit stronger than the first in the Nasdaq, but still comparable to it in the S&Ps and Dow. Once again, however, the volume dropped off as the pullback formed, indicating that the bears were still not feeling that aggressive. Often trends such as this will form with three waves of upside before the lower channel breaks. This meant room for the third high to form into the early afternoon. It hit highs with the 13:00 ET reversal period and the pullback took the indices into support at the 15 minute 20 sma and a lower low intraday.

In order for a trend reversal to confirm, not only must it have a lower low, but a lower high as well. The market had a more difficult time with this second part of the criteria. The buying off the support at 13:30 ET was simply too strong to begin with and the indices quickly returned to the mid-day highs. The momentum did attempt to turnover again into the final hour of the day by slowing at the mid-afternoon highs as the indices held prices resistance from intraday highs on Wednesday, but the final move lower still had no volume confirmation.

After just a few minutes of rapid selling the momentum again stalled into the 15:30 ET reversal period and this slowdown again led to another more rapid move off support, which in this case was the previous 5 minute lows. Essentially, even through there were some very slightly higher highs, the market spent the afternoon in a trading range, but pushed through the upper end of that range into the close and into afterhours trading.



Despite the upside in the indices, most of the top gainers on the session did not get there by trending higher throughout the day and most of the top percentage gainers in the Nasdaq were not stocks I run into very often. The top ten symbols in my Nasdaq % gainers scan at the end of the day were BEAS, TIBX, GIGA, IFON, JASO, HLYS, INNO, URRE, MBLX, and CALM. BEA Systems (BEAS) made the list thanks to a buyout proposal by Oracle Corp. (ORCL). It gained 5.20 points, or 38.2%, by the end of the day. Most of this upside was in the form of the gap. Innovo Group, Inc. (INNO), which is not a stock I can recall ever hearing of, is a cheap little apparel and accessory company that announced plans for a merger with JD Holdings. It rose $0.14 (+8.7%).

Some more popular names topped the NYSE gainers list. These included GM, RIO, STV, AMR, EK, FXI, GRA, SWY, TDC, and TRA. General Motors Corp. (GM) was one of the few stocks to trend strongly throughout the entire session. It gained 2.65 points, or 6.6%, by the end of the day. Companhia Vale do Rio Doce (RIO) came in at a close second with gains of 1.82 points, or 5.3% gains.

Among the day's losers were Coldwater Creek Inc. (CWTR), which fell 28.1% after it lowered its forecasts; CalAmp Corp. (CAMP), which lost 11.2% following earnings; and Beazer Homes USA Inc. (BZH) after it reported that it will be required to restate financial results due to an independent internal investigation. Other top losers were ATI, CAPA, SHRP, CHS, LDK, LEN and LDK.

I am not feeling very strongly about either side of the market at this point for longer term potential, other than the fact that Friday's buying has held off the bears for the time being. The bulls triggered a 15 minute buy setup into the close and I expect this to play out into Monday morning, but the highs from Thursday will serve as some strong price resistance and it will be very easy for the market to fall into a longer congestion with Thursday's highs and lows holding as resistance and support. The Nasdaq will have an easier time making a slightly higher high on the 60 minute charts next week than the Dow and S&Ps will.

At this point the market has not developed enough in terms of the momentum within that potential range to indicate the most likely direction for it to break. I was feeling a lot more bearish heading into Friday's session, but quickly reversed my bias intraday early on in the session. Given the extent of Friday's bounce, there is no immediate sell pattern forming yet intraday, but we can still easily see the bears return during Monday morning's trading for another decent intraday decline off Thursday's highs.



Economic Reports and Events This Week


Monday, October 15, 2007
8:30a.m. Oct NY Fed Manufacturing Index. Expected: 13.25. Previous: 14.70.

Tuesday, October 16, 2007
7:45a.m. ICSC Chain Store Sales Index. Previous: unch.
8:55a.m. Redbook Retail Sales Index. Previous: +0.3%.
9:00a.m. August Treasury International Capital Flows. Previous: -$3.0B.
9:15a.m. Sep Industrial Production. Expected: +0.1%. Previous: +0.2%.
9:15a.m. Sep Capacity Utilization. Expected: 82.1%. Previous: 82.2%.
1:00p.m. Oct NAHB Housing Market Index. Previous: 20.
5:00p.m. ABC/Wash Post Consumer Conf. Previous: -13.

Wednesday, October 17, 2007
7:00a.m. MBA Mortgage Application Survey. Previous: +2.4%.
8:30a.m. Sep Housing Starts. Expected: -3.9%. Previous: -2.6%.
8:30a.m. Sep Consumer Price Index. Expected: +0.3%. Previous: -0.1%.
8:30a.m. Sep CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.2%.

Thursday, October 18, 2007
8:30a.m. Initial Jobless Claims For Oct 13 Wk. Expected: +7K. Previous: -12K.
10:00a.m. Sep Leading Economic Indicators. Expected: +0.3%. Previous: -0.6%.
10:00a.m. DJ-BTMU Business Barometer. Previous: +0.3%.
12:00p.m. Oct Philadelphia Fed Business Index. Expected: 8.0. Previous: 10.9.

Friday, October 19, 2007
There are no economic indicators scheduled for today.


Key Earnings Announcements This Week:

Monday:
Before: SCHW, C, ETN, MAT, EDU, JNC, GWW
After: ADTN, BMI, DNA, JBHT, RBN, SONC, STLY

Tuesday:
Before: AOS, DPZ, FRX, JEF, JNJ, KEY, MNI, PII, RF, STT, SVU, USB, WFC
During: CBSH, DAL
After: AMB, CHB, CCK, CSX, ELS, EXFO, FSII, HBHC, INTC, LCBM, LLTC, PHHM, PNFP, RLRN, STX, SPSN, STLD, USNA, YHOO

Wednesday:
Before: ABT, MO, APH, ASML, BLK, CIT, KO, CMA, DSL, FCFS, GCI, ITW, JPM, LCRY, LUFK, MAN, MI, MTG, NCI, NTRS, PJC, RLI, UTX
During: AMR
After: ADS, ALL, ATR, ARNA, AVCT, CTXS, CBST, DTLK, ETFC, EBAY, GKK, HWAY, ILMN, RX, ISIL, KNX, KNL, LRW, LEG, LOGI, MOGN, MGI, NE, NVEC, PKG, PLCM, SOV, SPTN, SYK, TER, UFPI, VLY, WM, WDFC

Thursday:
Before: SHLM, AMFI, ASD, AME, ARB, AVCI, BAC, BK, BAX, BBT, BGG, BBW, CDWC, CHZ, CBH, CAL, CORS, CY, DHR, DJ, LLY, ENDP, FCS, FCSX, FHN, GPC, GAP, HSY, HNI, HBAN, IEX, IUSA, IIIN, IONA, JAKK, JRC, NITE, KVHI, LSTR, MCD, MHP, MMR, MEG, MOT, MSM, NOK, NVS, NUE, NVR, PH, PFE, PNC, BPOP, PPG, RS, SAP, SEIC, SIFY, LUV, STJ, SPWR, STI, TXT, TRAD, UTEK, UNP, UNH, USAK, WSO, WCC, WYE
During: HTLD
After: ACMR, AMD, AMLN, AZPN, BCR, CAMD, COF, CERN, CTHR, CHRT, CPSS, CREE, CYBC, CYT, EXAR, FNB, FCF, GILD, GOOG, IBM, ICUI, INFN, INFA, PODD, IBKR, ISRG, KMP, LDSH, MHK, MOLX, NYB, OO, OMCL, PKTR, PLL, PMCS, PGI, QXM, RIMG, RHI, RUSHA, SNDK, SSW, STAR, SYNA, TTGT, TPX, UB, VFC, VASC, VMSI, WERN, WSTL, WIT, XLNX, ZHNE, ZION

Friday:
Before: MMM. ACO, ACI, BSX, CAT, FITB, HOG, HON, KNSY, OSTK, SLB, SON, WB, WL, XRX

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Market Plunges Off Record Highs

Good morning! Thursday's session began on a strong note. The major indices all gapped higher, but the move was too much and left the market exhausted after nearly a week of upside already. Things were not looking great for the bulls heading into the day on, but then quickly began to deteriorate even further as the day progressed. The gap move took the Dow into price resistance from Tuesday's highs, while the S&P 500 and Nasdaq Composite both broke to new highs on the year. An extended period of congestion then followed, leaving the indices rather unexciting throughout the morning. An upside breakout took place in the early afternoon, but it failed to gain any momentum and the bulls began to become rather worried.



Although the S&Ps and Dow broke through the earlier highs, the Nasdaq languished. It made a lightly higher high, but the pullback around 11:00 ET helped change the momentum in the Nasdaq. Without another pivot low to break the channel that began around 11:15 ET, the market simply crept higher on the 15 minute time frame. Volume was very light during this time, which meant that while there was still predominantly buying pressure, most market participants were not that excited about the prospects.

Despite the action in the market as a whole, a number of stocks experienced some very strong intraday momentum moves. These included popular names such as Wynn Resort Ltd. (WYNN), JA Solar Holdings (JASO), Gigamedia Ltd. (GIGM), General Motors Corp. (GM), as well as others such as Hingli Green Energy Holding (YGE). Due to the earnings season, there will be a lot more of these types of play likely in coming weeks.



As I expressed in yesterday's column, I was not at all impressed with the upside in the market had was beginning to be on the lookout for strong reversals to create rapid downside moves on the 15 minute time frame. Boy did we see that happen or what! Wow! The sell signal came at about 13:30 ET, but once the selloff began there was no stopping it! The bulls, who had become wary of the upside, were now tripping over themselves to pull out. The fear is that another strong correction on the weekly time frame is lurking.



This market had a secondary move lower beginning just prior to 14:30 ET. This next drop took the market past many of the nearby support levels, until finally, at the 15:30 ET reversal period, they had enough . They bounced somewhat higher into the close, hitting the 5 minute 20 simple moving average, but remaining on the weak side afterhours as well. The Dow lost 64.57 points (-0.4%) and closed at 14,198. The S&Ps shed 8.06 points (-0.5%) and ended the day at 1,554. The Nasdaq Composite was the hardest hit. It fell 39.41 points (-1.4%) and closed at 2,772. Some of the main perps were AAPL (-2.7%), RIMM (-5%) and VMN (-4.1%). Although the market will experience intraday corrections off support levels, I don't expect any strong movement past this week's highs for quite some time. Even a slightly higher high would probably just fail to hold, so be prepared for selling. Ideally it will wait for a 30 minute base at lows before doing so. We shall see how it goes!

Market Mixed as Light Volume Continues

Good morning! While the Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), Nasdaq Composite ($COMPX), and Russell 2000 ($RUT) all turned and held intraday support and resistance levels at the same time throughout Wednesday's session, the strong difference between the gainers in the Nasdaq and the losers in the Dow returned. This is similar to what happened in Monday's session, right down to the morning selling and late day reversal off lows.

By the end of the session the Dow had shed 86.8 points and closed at 14, 078.7. The S&P 500 was less committed either way and lost only 2.68 points. It ended the session at 1,562.47. The Russell 2k had the least change, falling 0.53 point to end at 845.19. The Nasdaq Composite, on the other had, posted a modest gain of 7.70 points. It closed at 2,811.61.



I missed out on most of the trading day, but overall there was quite a bit of chop, with the exception taking place mid-day. There were still some decent triggers, however, to offer nice trading ops, but the stakes were higher since the added choppiness meant larger potential stops compared to the potential gains.

Following the open, the market headed lower. This smaller 1 minute trend continued into the 10:15 ET reversal period. The reversal period combined nicely with the 15 minute 20 simple moving average support and price support from the prior session to allow the selling to come to a halt and a decent reversal trigger to form.

The Nasdaq quickly moved to new intraday highs, while the Dow barely budged. A second pullback into the 11:00 ET reversal period faired a bit better. A third intraday high was made in the Nasdaq, taking it back to Tuesday's highs, and the S&P 500 retested its morning highs. Slower momentum into these resistance levels and lighter volume on the buying then allowed the indices to roll over and fall into the 12:00 ET reversal period.



The decline into noon was the strongest downside action of the day up until that point. This continued shift in momentum was followed by a slower correction off the support at the previous intraday lows in the S&Ps and Nasdaq and prior morning's lows in the Dow. This correction continued to move higher into the 13:00 ET reversal period and the 5 minute 20 simple moving average, but it did on on weak volume, indicating a lack of eager participants in the upside move. A second wave of selling hit quickly out of the reversal period and off the resistance, taking the market into a second afternoon low at 13:30 ET, which is yet another reversal period.

The break in the trend channel of this second decline gave a nice buy trigger, but I had expected initially that it would only be a scalp trade into the 5 minute 20 sma again. The Nasdaq was forming three highs on the 60 minute charts and creating the risk of a larger correction, at least in the form of a lower trend line break. This meant that a bear flag was possible into 14:30 ET. As this next correction off lows developed, however, the momentum increased on the upside and even though the indices flushed quickly off the 5 minute 20 sma, it busted through that level going into 14:30 ET. The main trend of the day was now well underway.



This last major move of the session was not a pretty one for weak hands. The trend continued nicely until the last 30-40 minutes of the day, but the channel was rather wide with a great deal of overlap from one bar to the next on the 5 minute time frame. The best course of action in such a situation is to draw a lower trend channel line and when it breaks looks to get out, paying particular attention to the larger time frame resistance levels. In this case it was the previous afternoon's highs in the S&Ps and the morning lows in the Dow coming together at the same time. The risk, of course, is that since the channel is wide, you do end up giving a nice chunk of your gains if you are wrong. After holding the resistance at highs, the indices then corrected off the highs into the close, but did not get far and held up well into the wee hours of the next morning.

I am once again very cautious on upside action. I think the market is at a point now that a larger correction for a few days at least is imminent, but since the move did not take place on Wednesday, and the buying into the afternoon was still strong, it may take another day or so to turn over. At this point, however, I would not suggest being aggressive on the upside other than in daytrades, since the slowing momentum on the 60 minute charts into each new high opens the door for rapid downside flushes on the 15 minute time frame.

Market Rallies with Record Closing Highs in S&P and Dow

Good morning! The market managed another day of strong gains on Tuesday, but the session started out rocky. The indices gapped higher in the morning, but the gap was large enough that the initial buying took the ES (S&P 500 EMini) right into that 1570 level we had tagged as resistance earlier the previous evening. The absolute morning high was 1569.25. After hitting that level, however, the market needed a chance to rest and the gap soon began to quickly close coming off the 9:45 ET reversal period. The 5 minute 20 simple moving average and gap closure were the support levels on this same time frame. The 10:15 ET reversal period held for about 15 minutes, but then the market tested the support level more securely before pulling back higher into 11:00 ET.



After the market popped, the momentum began to shift, but unlike the previous day, the indices had been pretty much in sync all day and this remained true into the afternoon as well. The market fell into 11:45 ET when the 5 minute 20 sma stalled the selling. It congested along the moving average as volume declined to indicate a lack of motivated buyers. A nice sell setup triggered into 12:30 ET and took the S&Ps back into the zone of their morning lows. A second correction into the 5 minute 20 sma created the opportunity for a third mid-day decline. It triggered quickly and took the Nasdaq back into morning lows, whereas the S&Ps and Dow fell into negative territory.



By this time market participants were beginning to hedge their bets. The FOMC minutes were due out at 14:00 ET, but some eager players began to push higher ahead of the report. After it hit the S&Ps and Dow shot back into the intraday highs and the Nasdaq back into mid-day highs. A nice two-wave correction on the 1 minute time frame followed and formed an upside continuation pattern into 14:30 ET. The larger change of momentum helped the market then break to new intraday highs. This momentum continued nearly into the close. I got a short trigger on the NQ into 15:30 ET and that index flushed into the 5 minute 20 sma gain, but was not able to take the Dow and S&Ps with it.



By the closing bell, the Dow Jones Industrial Average ($DJI) had added 120.80 points (+0.9%) and it closed at 14,164.5. The S&P 500 ($SPX) rose 12.57 points (+0.8%). It closed at 1,565.15. The Nasdaq Composite was a weaker thanks the earlier extension from the previous day. It gained 16.54 points (+0.6%) and closed at 2,803.91. Alcoa (AA) helped by gaining 3.75%). This momentum still has room to continue into Wednesday morning. There is no strong exhaustion showing up at this point intraday, but resistance should hit early on in the morning. 1583 is the next 60 minute resistance zone. in the ES

Market Remains Split

Good morning! We have seen a lot of examples lately where the Nasdaq Composite ($COMPX) has been greatly at odds with the rest of the market. Whereas a few months ago the Dow Jones Industrial Average ($DJI) was often the strongest upside mover intraday, recently it has been the Nasdaq Composite that has led the bulls intraday. On Monday this divergence was even more pronounced. The Nasdaq futures trended higher throughout most of the session, while the Dow, S&P 500 and Russell 2k all closed lower. To put it in perspective, the Nasdaq gained 7.05 points on Monday (+0.3%), while the S&P 500 ($SPX) lost 5.01 points (-0.3%) and the Dow lost 22.28 points (-0.2%). The Russell 2000 ($RUT) fell 4.74 points (-0.6%).



This split in the market was apparent right away out of the open. While it is normal for the market to show some differences in terms of one index leading the other, usually they begin to fall in line within the first few minutes of the day. On Monday, however, the Dow gapped lower and immediately continued south, albeit slowly. The Nasdaq, on the other hand, opened lower by only a few ticks and then began to climb. The S&Ps and Dow fell into a low-level trading range while the Nasdaq broke to new 6-year highs. The momentum slowed and turned over into 11:00 ET. At the same time, the S&Ps and Dow broke lower out of their trading ranges after coming into the 5 minute 20 simple moving average resistance.

One of the primary factors contributing to this unusual market activity was the incredibly light volume. Monday was Columbus Day and apparently many market participants assumed that this meant they could take the day off! Sheesh! On the New York Stock Exchange about 851 million shares exchanged hands with decliners outpacing advancers by 2 to 1. On the Nasdaq there were almost 1.5 billion shares traded with decliners coming in at about half of that on the NYSE by outpacing advancers by the narrower margin of 4 to 1.



After the indices began to sell off the Nasdaq quickly dropped into the previous 5 minute lows while the Dow and S&Ps slid into the zone of the intraday lows from the previous session. The momentum slowed into this support and the indices all began to favor a bullish reversal over noon. Some slightly lower lows on the 5 minute time frames served as traps to new shorts and flushes for weak-handed bulls and by 12:30 ET most of the uncertainty was shaken out and the market began to gain momentum on the upside into the early afternoon. This was most pronounced in the Nasdaq, which had been leading the market, and the least pronounced in the Dow, which crept higher at a slower-than-average pace into 13:30 ET. The earlier congestion from the morning served as resistance and at 13:30 ET the market again began to correct.



Since the Dow and S&Ps experienced a lot of overlap in their move higher into the afternoon, this made them more susceptible to another flush. The whole market pulled back into 14:00 ET, but the Dow and S&Ps broke the prior low by a hair before triggering one of my favorite setups of the day around 14:15 ET. The double bottom in the two weaker indices allowed the market to quickly retake the prior 5 minute highs, but they S&Ps and Dow had a much more difficult time continuing that momentum. The Nasdaq trended incredibly well into the close, but even though the Dow and S&Ps had rounded off very nicely at the intraday lows, they were not able to pick up any momentum of their own.

My bias is that the market can still pick up this momentum into the morning on Tuesday, but the upside is becoming more and more extended and hence and more risky in terms of the potential to be flushed lower. The 1570 level will serve as resistance in the ES (S&P 500 EMini), while the next major support level if the 1560 level breaks is going to the at about 1552. Either of these zones should lead to a correction off them on a 15 minute time frame or greater.



Economic Reports and Events This Week

Tuesday, October 9, 2007
7:45a.m. ICSC-UBS Chain Store Sales. Previous: Unch.
8:55a.m. Redbook Retail Sales Index. Previous: +0.3%.
5:00p.m. ABC/Wash Post Consumer Conf For Oct 7. Previous: -12.


Key Earnings Announcements This Week:

Tuesday:
Before: CMN, CBSH, MTB, OXM
After: AA

Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!

Market Rallies on Jobs Data and Range Breaks Higher

Good morning! The market had a really strong day on Friday to finish up the week. The 60-minute buy setup we were watching heading into the day followed through famously. The day began with a nice upside gap after the September employment report was released and showed increase of 110,000 payrolls. This was in line with expectations, but the report was accompanied by an upward revision of August's data, which had originally showed a decline of 4,000 payrolls. This number was tossed aside when the revisions to August's report showed an 89,000 increase of payrolls instead.



Following the larger-than-average gap, the market took a bit of time to catch its breath. The gap had taken the indices into price resistance from several days earlier when the Dow Jones Industrial Average closed Thursday's morning gap. The Nasdaq remained the upside leader, attempting to move up out of 10:00 ET, but quickly pulled back in so that the overall correction from the gap lasted until the 10:45 ET correction zone. At that point the market broke cautiously to new intraday highs and then began a steady climb into noon.



The Nasdaq Composite stalled first just after 11:30 ET, but the S&P 500 and Dow Jones Ind. Ave. continued into the 12:00 ET reversal period before stalling. As on Thursday, the volume in the marketplace began to dry up over noon. The indices fell into a narrow trading range which lasted until about 13:30 ET. The Nasdaq, which had the best performance earlier in the day had a more difficult time on the breakout, whereas the Dow and S&Ps, which were not as extended as the Nasdaq, experienced another steady move higher throughout most of the afternoon. The S&Ps led the move this time around.

The greater degree of overlap from bar to bar on the 5 and 15 minute time frames in the S&Ps and Dow opened the door for a flush in the late afternoon. When the market climbs on the same momentum as the 20 period simple moving average, whether it hugs it exactly or not, you will always have this risk. When the S&P 500 hit the prior daily highs that gradual uptrend move finally broke. The selling hit at the same time as the 15:00 ET correction period. The 5 minute 20 sma served as some initial support, but the market broke lower again into the final correction period of the session at 15:30 ET after congesting along that level on declining volume.



There were few securities which missed the boat on Friday. For the most part, the market left investors rather happy. The Dow rose 91.70 points by the close, but made record highs intraday of 14,124. The S&P 500 gained 14 points, while the Nasdaq rose 46 points. News in the financial sector kept things busy. Washington Mutual, Inc. (WM) and Merrill Lynch & Co. (MER) both made well over 2%. Alcoa Inc. (AA), which kicks off earnings season on Tuesday, gained 3% on Friday. Another top gainer was Research in Motion Ltd. (RIMM). It rose 12.8% after it doubled its bottom line in the second quarter this year. AAPL, BOBJ, and LAMR were also among the leaders.

Trading Remained Mixed Ahead of Friday's Jobs Data

Good morning! The market barely managed to post gains in Thursday's session after yet another day of choppy action. The Dow ($DJI) added 6.26 points, the S&P 500 ($SPX) added 3.25 points, and the Nasdaq Composite ($COMPX) added 4 points. The indices initially followed through on the bullish sentiment I had heading into the day by gapping higher, particularly in the Dow Jones Industrial Average. The market was hitting upper trend channel resistance with the opening prices, however, and almost immediately began to sell off. The selling was rapid and steady into 10:00 ET when the August factory orders data was due out. As that data release approached, the S&P 500 and Russell 2000 began to round off at lows. They triggered reversal patterns right away following the release from the Commerce Department that new orders for U.S.-made factory goods dropped 3.3% in August, which was the largest decline in seven months.



The Nasdaq Composite again took the lead as it has in many of the recent sessions and quickly rallied first to the 5 minute 20 simple moving average resistance and then past it into 10:45 ET and into the morning highs, which served as price resistance. Early morning highs also hit in the S&P 500 at about the same time heading into 11:00 ET, but the Dow had an extremely difficult time and dragged its feet while the rest of the market climbed. While the S&P and Nasdaq were testing the day's highs, the Dow had barely managed to take back half of the morning's losses.

Trend channel and price resistance both worked together to halt the mid-morning rally. Due to the sharp upside momentum, the reversal off the highs began slowly, but the pace continued to turn over on the 1 minute time frame and by 11:45 ET the selling had increased, particularly in the Russell 2k. While I don't have a chart posted here, it formed a great Avalanche reversal pattern by pulling back off highs a bit, basing into 11:30 ET, and then quickly pushing through the support and back into the zone of Wednesday's close. It was the cleanest reversal pattern to take place mid-day.

The drop continued nicely into noon when it came into price support from earlier congestion and pivot levels on the 5 minute time frame and the 15 minute 20 sma. The indices again bounced, but while the momentum on the bounce was strong, the indices were now firmly in the grips of a trading range and I quickly warned those in the chatroom I hang out in to expect choppy trading and a narrowing range over the next two hours, which would take the market into 15:00 ET.



As that 15:00 ET correction period approached I found myself rather uncertain as to which bias to favor. The Dow was triggering a short setup on the 15 minute time frame, while the Nasdaq was forming a strong buy setup. While I favored the upside move, I could not completely disregard the Dow. It is unusual for the major indices to move in two contradictory directions during the primary trading session after the first few minutes of trading, but this is exactly what happened on Thursday afternoon.

The Dow fell into its first major support level at the morning lows which hit heading into 15:30 ET, while the Nasdaq was on its way to its first resistance level at about the same time, hitting the mid-day price resistance and first target on the long side as the Dow hit the first target on the short side. Of course, such divergence rarely hold for long, so given the relative strength of the Nasdaq, I took its side into the close.



On Friday all eyes are on the morning's jobs data. On Thursday the Labor Department reported that first-time filings for state unemployment benefits rose by 16,000 to 317,000 in the previous week. On Friday it issues its employment report for the month of September. Economists are expecting an increase in new jobs by about 115,000. From a technical standpoint, the market is forming a nice bullish pattern still on the 60 minute time frame. The indices rounded off at support in Thursday's session and this will make it very easy for bullish follow-through to play out into Friday. Monday's highs will be the first zone of resistance to watch out for , but can still break more easily in the Nasdaq and S&Ps than in the Dow.