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, whom 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.

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.