Good morning! Tuesday's session was a very slow one. The morning saw a strong upside gap that took the NASDAQ Comp. right into its 30 minute 20 sma resistance at the open. The SP500 futures were basing at highs in the premarket after some nice upside overnight as well. This gave us that bullish move I was looking for going into the day. The SP500 base broke right into the open, taking the market even higher. The size of the gap was so extreme already for the market as a whole that it was very difficult to really mount a strong continuation, so the indices merely crept higher going into lunch.

With such a narrow range, despite our bullish outlook, it was difficult to get a lot of action intraday. The gap took out a lot of the potential we were looking at when I wrote yesterday's column. The afternoon FOMC announcement served to add to the lack of interest by market participants. As we went into lunch, I was no longer willing to keep looking for setups since it was likely that we would not see anything until after the Fed. The market did manage to pull in a little, but held the 15 minute 20 sma very well before crawling back up towards highs ahead of the Fed.

As the afternoon wore on, the NASDAQ actually began to form a very nice buy setup on the 15 minute charts as it based along highs. I didn't figure that we'd get a strong reaction to the Fed. unless the news was something unexpected. The reason was that with the recent Fed. announcements, each time has been less and less exciting. The outcome on Tuesday was one of the least volatile reactions of the year. We saw a trigger for the upside breakout in the NASDAQ shortly after the news and this continued right smack into the price resistance from the prior highs.

I wasn't expecting as strong of a move off the afternoon pivot highs simply because the pace was pretty rapid into those highs and the market as a whole still had plenty of time to correct to the last several days of selling. As a result, I just sat aside at that point to wait it out, figuring that a range would be likely. Instead, the selling from the pivot high was rather strong. It wasn't until the 15:30 ET reversal period that we finally saw some decent support. This is where the Dow hit morning lows and the reversal period helped to create a 5 minute "hammer" candlestick reversal pattern, leading to a  bounce off lows that lasted into the close.

On Wednesday it is looking like we will continue to see some correction from Monday's lows. There is not a strong setup on the larger intraday charts though at this time, so we can easily find another choppy day. Swingtrades will remain higher risk.

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. QLGC is on my watch list as a longer term short on a break down out of the current weekly low-level base.

Economic Reports and Events
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. 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.