The market continued to give us that additional downside we've been looking for into the weekend in Wednesday's session. The day began on a bit of a positive note with the indices gapping slightly higher before retesting Tuesday's lows. After three waves of downside the prior day, however, the trend was still extended on the downside, so it made it relatively easy for those lows to hold and for the market to attempt to correct throughout the rest of the morning.

The immediate reversal off the morning lows around 10:00 am ET was rather valiant. The market popped quickly and the market then based into 10:30 to form a Phoenix pattern on the 5-minute time frame. Unlike Tuesday's failed attempt at the same price action, the Dow Jones Ind. Average and S&P 500 managed some decent follow-through on it this time around. The Nasdaq Composite, however, failed to really break the morning highs. The rally in the Dow and S&Ps did not hold though. Initial momentum quickly stalled and the market rounded off at the highs from the previous afternoon, creating a short setup around 11:30 ET.

The market slowly rolled over as the mid-day trading progressed. An Avalanche into noon confirmed the reversal and a channel along morning support into about 13:30 ET continued to push the market lower. When that afternoon base gave way, it took the market past the morning lows and the momentum increased sharply once those lows gave way. Another bear flag into the 5-minute 20-period simple moving average finished off the session, taking all three of the major indices to new intraday lows. For the third day in a row they closed at them.

The Dow Jones Industrial Average ($DJI) finished lower on Wednesday by 65.03 points, or -0.5%, at 12, 200.10. 22 of its 30 components lost ground. The most notable one to NOT do so was Walt Disney Co. (DIS). It reported earnings which beat expectations and closed higher by 4.8%. The auto manufacturers were the big losers on the day. General Motors Corp. (GM) lost 2.87% thanks to a downgrade by Bear Stearns. Ford Motor Co (F) also saw its rating fall and its share prices along with it. Ford lost 1.9% on Wednesday.



The S&P 500 ($SPX) fell 10.19 points, or -0.8%, and closed at 1,326.45. JDS Uniphase (JDSU) (+25.98%), and Polo Ralph Lauren (RL) (+9.97%) were the top gainers, but more noteworthy were the top losers. CME Group (CME) lost a whopping 103.55 points on Wednesday, or 17.59%. Harman Intl (HAR) came close in terms of percentage with a loss of 15.37%, but nowhere near it in terms of point loss. It shed 7.03 points.



The Nasdaq Composite ($COMPX) closed lower by 30.82 points on Wednesday at 2,278.75. Celgene Corp (CELG) (+3.18%), Paccar Inc. (PCAR) (+2.87%), and Tellabs Inc. (TLAB) (+2.81%) led the gainers, while Marvell Technology Group (MRVL) (-10.20), IAC Interactivecorp (IACI) (-6.97), and Apple (AAPL) (-5.69%) led the losers.



Although we are likely to start to see less of these downside trend days into the weekend, the market bias is still favoring the bears. I am expecting continued selling with only intraday corrections on a 15-minute time frame, such as that which took place on Wednesday morning. I would like to see a slightly lower low on the Nasdaq and retest of the previous daily lows zone in the Dow and S&Ps before I am willing to commit to anything overnight on the upside at this point. I think these levels are quite possible over the next several days.

Notice: Due to family visiting, I will not be posting a column tomorrow evening, however, it will resume for Monday's trading.

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.