After breaking the 60-minute trading range several days ago, the market has had a difficult time making any headway on the upside. The bears have dominated the playing field. I discussed yesterday that the market was creating a potential two-wave correction within a larger trend move. These type of move tends to continue in the direction of the larger trend. In this case, that meant a continuation of the selling on the 15-minute time frame.



The market did an excellent job of living up to expectations. While the indices did move higher out of the open, they created a bear flag which led to a break to new intraday lows at about 10:30 ET. This confirmed the larger bearish bias and kicked off the third straight day of losses in the indices. By the end of the day on Thursday, the Dow Jones Industrial Average had lost 306.95 points, or 3.5%, on Thursday. It closed at 12,159.2.The largest loser was American International Group, Inc. (AIG), which fell 6.3%. Merck Co, Inc, (MRK) came in close, however, with a loss of 6% on Thursday. The S&P 500, meanwhile, fell 39.95 points, or 2.9% and closed at 1,333.26. The Nasdaq Composite lost 47.69 points, or 2%, on Thursday. It ended the session at 2,346.9.



There was very little bullish action at all on Thursday. While the market experienced numerous corrections off support levels, not one of them managed to gain the upper hand and take over the momentum from the bears. The market continued to chop lower throughout the entire day on Thursday. The 5-minute 20-period simple moving average was the main resistance throughout the trend move. Over noon the market formed another 2-wave correction. This time it was on a smaller time frame, but the outcome remained the same. The bears were able to regain control and the market closed within several ticks of the day's lows. This was a move into the -38.2% Fibonacci retracement level on the daily time frames in the Dow Jones Industrial Average and S&P 500.



As we head into the weekend, I tend to think some very slightly lower lows may be possible, but for the most part I am expecting some corrective action off this larger daily price support. The 20-day simple moving average is going to serve as the first major resistance level in the indices.

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.