The market was all over the place on Thursday. The day began a bit slowly following Wednesday afternoon's sharp correction off lows. As expected, the correction continued into Thursday, but it got off to a slow start. The indices had gapped lower into the open after steady premarket selling and then climbed slowly out of the open as volume dropped off while market players moved to the sidelines ahead of expected remarks out of the Fed.



The uptrend channel on the 5-minute time frame broke lower with the 10:15 am and 10:45 am ET correction periods, but very little activity followed. The volume continued to decline and the market chopped around into the 15-minute 20-period simple moving average until noon. At that point the indices had pulled slightly higher within the congestion and were basing along the 5-minute 20-period simple moving average. This created a buy setup that just took off when the Federal Reserve remarks came out and Chairman Bernanke announced that more rates cuts are likely necessary to support growth and hold off "downside risks."



The initial reaction to Bernacke's news was a sharp rally. The rally did not last long, however, and only about 10 minutes later began to pull in once more. Support hit initially at the 5-minute 20-period simple moving average, which had originally been the resistance, and after congesting along that support for about an hour it gave way to another rapid drop. The second decline took the indices back to the mid to lower end of the late morning congestion. They found support at that level, corresponding to the 14:00 ET correction period.



The market began to roll back over once again into the final two hours of trading, but it really received a boost at about 14:15 ET when more news hit the wires about Countrywide Financial Corp. (CFC). CFC rallied 51.5% on news that Bank of America is interested in taking over the mortgage lender and is in advanced talks to acquire the company. This provided the catalyst for still more buying and kicked off three waves of buying on the 3-minute time frame before stalling and pulling back in a bit during the final 45 minutes of the day after hitting resistance at prior highs on the 15- and 30-minute charts.

At the time of the closing bell, the Dow Jones Industrial Average was up 117.78 points, or 0.9%. It closed at 12,853.1. The S&P 500 was up 11.20 points, or 0.8%, and closed at 1,420.33. The Nasdaq Composite experienced the smallest gains, adding only 13.97 points, or 0.6%. It closed at 2,488.52. As I've mentioned over the past two days, we are likely to see this correction off lows continue into this coming 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.