The market had a rough time on Friday, failing to hold up after it attempted to rebound on Thursday afternoon and again on Friday morning. I had been hoping for a stronger showing on Friday to allow the market to play out this daily correction off last month's lows a bit longer into the end of the year, but things are looking weak heading into the light holiday trading coming up. Friday began with a large downside gap in the indices heading into the opening bell. This took the market directly into support from Thursday afternoon. Stronger-than-average gaps in the indices themselves have a greater propensity for filling than average-sized gaps, which meant that despite the losses, the indices had a bullish bias initially since such gaps usually try to fill within the first half of the day.

Despite the bullish bias, the bulls had a more difficult time actually latching onto that sentiment. There was still a lot of hesitation and the market was quite choppy throughout the first hour of trading. Nevertheless, the indices made their way slowly higher with a great deal of overlap into the 5-minute 20 period simple moving average. When that resistance level hit the market then began to congest, forming a little bull flag as volume dropped into 10:30 ET. At 10:40 ET the market spiked, busting through the resistance and rising quickly to close the morning's gap.



The gap resistance zone hit at the same time as the 11:00 ET reversal period. This corresponded to Wednesday's closing prices in the S&P 500 and Dow Jones Industrial Average and Thursday's highs in the Nasdaq Composite. Having accomplished its goal, momentum slowed in the market at that point and rolled over with increased pace on the downside. An Avalanche pattern emerged in the form of a choppy base into about 11:30 ET, which broke lower into 11:45, providing the first confirmation of a change in the intraday trend. Another low-level base followed into noon, which gave way to further selling into 12:30 ET. This took the S&Ps and Dow back to the opening price zone, which served as a strong support level into the early afternoon.



The market continued to remain weak throughout the rest of the day. The S&Ps and Dow popped for a couple of minutes into 13:00 ET, but failed to hold. As the indices hit the previous breakdown down point from mid-day they held and slid lower into 14:00 ET. Another slow congestion zone formed with very slight upside, breaking strongly to the downside on the 5- and 15-minute time frame into the final hour of trading. The Nasdaq suffered the strongest losses, but all three of the major indices closed within a few ticks of the session's lows.



Friday's session ended with losses across the board. The Dow Jones Industrial Average ($DJI) fell 178.11 points, or 1.3%, and closed at 13,339.8. This added to the earlier losses on the week for a decline of 2.1% for the week as a whole. Two of the top losers were Alcoa Inc. (AA), which fell 3.1%, and Home Depot Inc. (HD), which lost 3.6% by the close. Microsoft Corp. (MSFT) was the Dow's only advancing issue. It only gained 9 cents, however, so it was not exactly a stunning success, although it was at least a survivor!

The S&P 500 ($SPX) and Nasdaq Composite ($COMPX) also failed to hold up on Friday. The S&Ps lost 20.46 points, or 1.4%, and closed at 1,467.95. This was a loss of 2.4% on the week overall. The Nasdaq fell 1.4% as well, which equaled 32.75 points. It closed at 2,635.74 with a 2.6% loss for the week. The Russell 2000, while not shown in the charts here, also closed at the lows of the day on Friday. It had an even worse performance than the Nasdaq, ending lower by 2.02%, or 4.02% on the week.

Given the action over the past week, the chances of seeing the stronger overlap and choppy upside over the next couple of weeks that we have been watching for and had been developing thus far this month has diminished. The odds are higher that we will see continued selling early this week, although we can then easily see the market try to turn back around on Tuesday. We should expect things to start to slow down, however, as the week progresses and holiday trading continues.

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.