The range widened intraday on Friday, but still held the larger daily congestion zone. All three indices posted mild losses despite greater intraday activity and sharp bouts of selling. The Dow Jones Industrial Average ($DJI) fell 17.31 points (-0.1%) to close at 13,895.63. This meant a 4% gain on the month and an 11.5% gain thus far on the year. The S&P 500 ($SPX) lost 4.63 points on Friday (-0.3%). It closed at 1,526.75. The monthly gain the S&P 500 came to 3.6%, which meant a 7.6% gain on the year. The Nasdaq Composite ($COMPX) also managed a strong showing to end the month. Despite losing 8.09 points on Friday to close at 2701.50, it also gained 4% on the month. The recent relative strength, however, has not been reflected in the longer term gains, which only amount to 3.8% on the year to date.



Heading into Friday's session my bias was "hesitantly higher," but with a very wary eye due to a number of signs of upward exhaustion. As such, as I mentioned heading into the day, I was on the lookout for any change of intraday momentum to flush out the bulls. While the bulls did in fact hold on going into the session, and the move to the upside out of the open was pretty quick, and it did not last for long. Within the first 20 minutes of the day the indices had found resistance at previous highs and soon gave up trying to push through them.



After turning over into 10:00 ET, the indices began to sell off very quickly. The reversal gained momentum over the course of the next half hour and took all three indices past Thursday's lows, retracing the entire previous day's price range in a mere 30 minutes. Support hit initially at 10:00 ET with a push to those lows and into the S&P 500's 15 minute 200 simple moving average. This corresponded to the closure of Thursday morning's gap in the Nasdaq Composite and Thursday's opening highs in the Dow Jones Industrial Average. The market then pushed slightly lower to test the support levels more securely at the same time as the 10:45 ET reversal period hit.

The slowdown in the momentum as a result of the slightly lower lows, combined with the reversal period and the larger time frame support all worked together to create a correction off the morning lows. I took the YM due to its greater relative strength into the previous day's close. While the Dow made it back into the early morning congestion zone, the S&Ps and Nasdaq had an extremely difficult time showing any inclination to assist the bulls. They held the lows instead, pulling slightly higher in a trading channel along the lows. This channel broke initially into 12:00 ET and then a second channel followed into 14:00 ET.



As the S&Ps and Nasdaq continued to move slowly off the lows, the Dow managed to retest the morning highs, but volume was light throughout the upside. After the highs hit, along with the 14:00 ET reversal period, the bears again took over. An initial drop into the morning lows in the Nasdaq was soon followed by a correction and second decline into 15:00 ET. Momentum again accelerated throughout the move. It exhausted itself around 15:10 ET as the Dow fell into its morning lows.

While I timed the support and pivot off the lows very well, I was nevertheless surprised at the extent of the bounce off those lows in the final 45 minutes of the day. The market nearly made it all the way back to the 14:00 ET breakdown prices, which meant that the rally during this time was actually stronger-than-average. This action also is one indicative of market congestion, however, and tends to be followed by trading range activity.

With a range already well under way though, I am hoping to see some better intraday swings this week and a potential resolution to the range, although there is still the potential for it to hold the range into the 20 day sma zone. My directional bias is once again bullish on the 60 minute time frame, but I continue to remain on edge given the daily overhead resistance at previous highs in the Dow and S&Ps and the larger uptrend extension in the Nasdaq since the 18th.

I do not expect any upside to be very sustainable if it begins early in the week, since a base on the weekly time frame will typically be necessary to bust through daily resistance such as this. As we head into the end of Sunday's afterhours trading at 11:40 p.m. ET, the market is currently bearish on the 15 minute time frame, but it is hard to say whether or not it will sustain the move heading into the open since there is still plenty of time for the momentum to change again before then.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.