The market had quite a bumpy ride on Thursday after the Federal Reserve left it rather confused. On Tuesday it had cut rates by a quarter percent and the market took a beating, disappointed that the half point rate cut many had been hoping for had not materialized. Then the indices had bounced back into the open on Wednesdays on news of intervention from the Fed with plans to increase liquidity, but the promise fell mainly on deaf ears and the market sold off throughout the entire session.

On Thursday there was very little focus. The market was oversold and despite attempts to push lower it was unable to. I had been on the side of an afternoon reversal throughout the day but was starting to lack conviction by the time some buying finally did appear. All in all, it was a tough session and while many traders I know were positive on the day, many also felt themselves rather lucky to be so (although luck often has little to do with it!)



Although the volume in the market was pretty strong on Thursday, the trend was not. The session began with a slight downside gap, which immediately attempted, but failed, to fill. After the first few minutes of trading the bears took over again and brought the indices to new intraday lows. A descending triangle was made over the next hour, leading to a breakdown into the 11:00 ET correction period. This low held the one from Wednesday, keeping in tack the larger range action we have been looking for on the daily time frame.



The indices then began to roll over slightly. The momentum remained a little more on the bearish side as the indices held the lower end of the range over noon, but I backed off on shorts after the reversal lower into the early afternoon since the momentum on the downside over the last couple of days had left the market rather extended intraday and the base at low was not strong enough for a steeper decline. I was convinced that the market would trap people and reverse again into the afternoon, but I succumbed to the lure of lethargy after such a choppy and slow morning and early afternoon and missed the ideal reversal trigger at 14:00 ET. Oops!



Once the 15-minute 20 sma resistance broke, however, the buying was fairly steady. It came in two waves of upside, broken by two waves of corrective action from about 14:20-15:15 ET. Then the buying continued again into the close, taking the indices back to morning highs and even beyond in the case of the S&P 500 and Dow Jones Industrial Average. Both finished slightly positive on the day. The Dow Jones Industrial Average ($DJI) gained 41.1 points to close at 13,518. Honeywell Intl Inc. (HON) was a strong gainer on upbeat earnings targets. It climbed 5% on the day. The S&P 500 ($SPX) rose 1.82 points to close at 1,488.41. The Nasdaq Composite ($COMPX) failed to close in positive territory. It lost 2.65 points and closed at 2,668.49.

Despite the Nasdaq's losses, all three of the indices managed to hold those Wednesday lows we were looking for in order to hold the daily pattern we have been following over the last couple of weeks. This means that it is still in line with forming choppy, overlapping action with slight upside continuing into the end of the year. We do need to see this hold better into Friday, however, so that we continue to see that greater daily overlap back up into Tuesday's highs into early next week.

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.