Good morning! The market had another whip-lash day on Wednesday when, after gapping down and then rallying strongly into lunch, the indices sold off sharply into the close. The morning gap had brought the market right into the prior NASDAQ lows, which served as support and helped pull it back up to close the gap. At that point the 5 minute 20 sma held and we saw a base along it into 10:30 when it broke higher out of the 5 minute Phoenix. The NASDAQ showed the strongest intraday action due to the 50 day sma support and managed to create a much larger than average upside move, although the Dow Jones Ind. Ave. stalled with an equal move going into the 10:45 ET reversal period.

After slowing at the reversal period, the market fell into a range going into lunch. Due to the NASDAQ's extreme move, I had expected the market to hold the morning lows, but the Dow had a tougher time. Even though the market broke higher into the early afternoon out of the 5 minute triangle at highs, when the NASDAQ came into price resistance from the 22nd as the Dow and SP500 also hit a number of price and moving average resistance zones, it turned over with a slightly higher high that triggered a 2T reversal on the 2-5 minute charts. The 13:00 ET reversal period helped as well and the market dropped into its 5 minute 20 sma where it based again to form a 5 minute Avalanche that continued into the afternoon reversal.

It was shortly after the Avalanche that the pace in the selling really began to pick up. I had looked for the 5 minute 200 sma, which was also the 30 minute 20 sma zone, in the NQ (NASDAQ EMini) to hold for a correction into the 5 minute 20 sma. Instead it broke much more quickly and the market put in a very large decline to new lows on the month. Exhaustion only came with the 15:00 ET reversal period when volume became to really pick up and spiked on the 15 minute charts. The selling was too strong to create much of a correction off lows, however, before the close.

The 20 week sma remains the next main support level in the indices and it is looking like we could see that hitting very soon. The break in the remained of the moving average support on the Dow suggests that the selling can continue to pick up pace on the daily charts until that larger support hits. Even though the market is pretty extended on the downside intraday, use a lot more caution on longs at this time.

Updates: AMT from Monday made new highs on Wednesday, while WWY had a much more difficult time once the market gave way to selling.  INFY short the 15th hit new lows before correcting intraday off $66.61. HSP long is something I am still watching for a position trade on a breakout from the weekly range, but the QLGC base along $30 that I've been following has pulled over the 20 week sma, so I will be removing that from my watch for now.

Economic Reports and Events
Aug. 25: Initial Claims 08/20 (8:30 am), Help-Wanted Index for Jul. (10:00 am)
Aug. 26: Mich. sentiment-Rev. for Aug. (9:45 am)
Aug. 29: -
Aug. 30: Consumer Confidence for Aug. (10:00 am), Factory Orders for Jul. (10:00 am), FOMC Minutes (2:00 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Aug. 25: AVNX (4:00 pm ET), CHS (A), CMOS (A), DG (B), LTXX (A), OVTI (A), PDCO (B), PETC (A), SFD (B), TOL (?)
Aug. 26: -
Aug. 29: -
Aug. 30: ADCT (A), SMTC (A)

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.