Good morning! The market experienced a third day of selling to kick off the new week. The day began with a bit of an upside gap, right into price and moving average resistance intraday. The Dow Jones Ind. Ave. and SP500 both hit Friday's highs and the 30 minute 20 sma served to stall both the NASDAQ Composite and SP500. The reaction was not immediate, however, and the market fell into a bit of a range for the first 45 minutes of the day. After the SP500 and Dow came into their 5 minute 20 sma support at the 10:15 ET reversal period though, the market then formed a two minute base along the support before breaking way and leading to a closure of the gap in the SP500 and Dow and new lows in the NASDAQ.

The market had a pretty nice technical day. Support and resistance levels held well. The market pace turned over in a rather textbook manner. Nevertheless, for stocks I didn't really find a lot out there for even daytrading. We saw a nice correction over lunch, coming right out of the 11:00 ET reversal period, but due to it being day three of a downtrend, new positions in the direction of the intraday trend became higher risk since the trend placement was becoming more extended.

The 13:00 ET reversal period brought with it another break lower. As with the morning drop, this one took place in two phases on the 5 minute charts. The second came out of the 14:00 ET reversal period and took the market into an equal move on the 15 minute charts at the 14:30 ET reversal period. The made for one more pivot off lows as volume spiked into the strong price support.

As with the prior couple of afternoons, I wrapped up about an hour early because, while the pace was stronger on the downside as compared to the upside, the trend was now ending a three day move where the 15 minute 20 sma resistance had not broken on the NASDAQ. Rarely will it move more than that without first putting in a larger correction, so despite the base again near lows out of the 14:30 ET pivot, there was no way I was going to take the risk of another short. I figured that the lows would actually hold on the day and we'd at least base into the close. The NASDAQ managed to make a very slightly lower low, but aside from that, the market did hold the support for the remainder of the day, making for another slow and choppy last hour of trading.

On Tuesday I am expecting to see that 15 minute 20 sma break in the indices. The daily charts have plenty of room still to move on the downside, however, so I would reserve buying primarily to daytrades. With so many bases at lows and subsequent breakdowns, the next correction on a 15-30 minute charts should pull off lows more, creating a greater price correction than the prior corrections of the last several trading days. This should provide some buying opportunities on the shorter term time frames. Rounded lows would assist with stronger intraday upside moves. So far we do not have that forming, but it is something to watch for in the morning.

Updates: VAR from the 20th $38 around hit new highs the 27th at $40.70 before closing on the day with a base at highs ahead of earnings for swingtraders. For a larger position trade I want the 20 day sma to hold. I am watching HSP for a breakout on the daily and weekly charts, but it can easily take a few weeks to even a few months to develop with the 20 week and 20 month simple moving averages serving as support. AEP is no longer on my watch list. QLGC is, however, as a longer term short on a break down out of the current weekly low-level base.

Economic Reports and Events
Aug. 09: Productivity-Prel for Q2 (8:30 am), Wholesale Inventories for Jun (10:00 am), FOMC policy announcement (2:15 pm)
Aug. 10: Treasury Budget for Jul. (2:00 pm)
Aug. 11: Initial Claims 08/06 (8:30 am), Retail sales for Jul. (8:30 am), Retail sales ex-auto for Jul. (8:30 am), Business Inventories for Jun (10:00 am)
Aug. 12: Export Prices ex-ag. For Jul. (8:30 am), Import Prices ex-oil for Jul. (8:30 am), Trade Balance for Jun (8:30 am), Mich Sentiment-Prel. For Aug. (9:45 am)
Aug. 15: NY Empire State Index for Aug. (8:30 am)
Aug. 16: Building Permits for Jul. (8:30 am), Core CPI for Jul. (8:30 am), CPI for Jul. (8:30 am), Housing Starts for Jul. (8:30 am), Capacity Utilization for Jul. (9:15 am), Industrial Production for Jul. (9:15 am)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Aug. 09: APCS (A), AQNT (B), BBI (?), CVC (B), CE (B), CBB (B), CSCO (A), CCU (B), CDE (B), DISH (?), ESCT (A), EIX (?), EP (B), FLYI (?), GEMS (B), GKIS (B), IIP (A), KFX (?), KG (B), LGF (A), LOUD (?), MCIP (B), TMR (?), NRG (B), NTLI (02:00 am ET), PA (B), PNRA (A), RL (B), SIMG (B), MAY (?), PGR (B), TLCV (B), URI (?), DIS (A), XOMA (A)
Aug. 10: AAP (A), AVT (?), CNR (?), CPST (4:45 pm ET), RIO (A), FD (?), INCX (A), MNTA (B), NWS (A)
Aug. 11: ADI (A), BGO (A), EAT (B), CREE (B), DELL (A), DT (02:00 am ET), DWA (A), ELX (?), FMD (A), HSP (B), ICST (?), JJZ (B), JMDT (A), KSS (?), NVDA (A), PSUN (A), PHH (A), TGT (B), TLWT (B), UBB (?), URBN (B)
Aug. 12: ALTI (?), ERJ (A), MOVI (B), PBR (?)
Aug. 15: A (B), MIVA (B), GG (A), KEP (B), LOW (?), PLAB (?); SYY (B)
Aug. 16: ANF (A), AEOS (B), AMAT (4:30 pm ET), BJ (B), DE (B), HPQ (?), HD (B), JCP (B), JWN (?), SPLS (?), EL (B), TJX (B), WMT (B)

 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.