From a technical standpoint, Friday was yet another correction day following the previous week's monumental gains. At the same time, however, the market had fallen, or corrected, into some initial support from January 28 in the S&P 500 and the Dow Jones Ind. Ave. The Nasdaq also hit support on Thursday from the 23rd. These support levels stalled the larger daily correction and on Thursday the market was pushed into a trading range on the 30-minute time frame.

Friday's session continued the 30-minute trading range. The market began to pull back a little about 5 minutes into the day, continuing into the 9:45 ET correction period, at which point the market broke higher, running to new intraday highs into 10:00 am ET. The 5-minute 200-period simple moving average intraday stalled this initial morning rally in the S&Ps and Dow, but while the momentum was a bit slower on this upside move than the prior one on the 5-minute time frame, it was not significantly so, and a third move higher intraday formed into 10:45 ET and continued into the 11:15 ET correction zone. This time the buying was a lot choppier and the market barely made new highs. The turning point came as the Nasdaq touched strong short-term price resistance at Thursday's highs.

The slowing upside momentum, assisted by declining volume, the 11:15 ET correction period and the price resistance from trading earlier in the week all led to the mid-day selloff which broke the intraday uptrend channel at about 11:45 ET. The 5-minute 20 sma support gave way after about 20 minutes of hugging the support level. This smaller base at support at the lower uptrend line was a little Avalanche pattern, which was part of a somewhat larger Head and Shoulders setup. When the support gave way, the momentum increased substantially. The market fell quickly into the morning lows in the S&Ps and Dow and the 5-minute 200 sma and morning congestion in the Nasdaq. The momentum slowed as these support levels hit, but the sellers pushed further into 12:30 ET and took the S&Ps and Dow to new intraday lows, while bringing the Nasdaq back into opening prices.

Although certainly a decent-sized move, the mid-day drop on Friday was not that great when compared to the average 15-minute moves lately. This left the market open for another hit in the afternoon. A two-wave correction off mid-day lows offered the perfect opportunity for the intraday bears to take another stab at a nice intraday position. Many continuation patterns form with these two-wave moves and the second high hitting at the 13:00 ET correction period was excellent timing on the part of the market, corresponding perfectly to the 5-minute 20 simple moving averages intraday as resistance. A second intraday selloff began at that time and continued into about 13:40 ET, which took the market back into price support from Thursday.

The market did have the potential to form a third wave of downside into the second half of the afternoon, but when it bounced off support it did so with a sharp pop higher just prior to 14:00 ET. The jump took the indices to the 5-minute 20 sma once again, at which point they fell into a sideways range with light volume to favor a Phoenix buy on the 5-minute time frame. This action alone does not mean that another selloff would be avoided. The Phoenix breakout could very well be a second upside move within a correction off lows, followed by another breakdown. This time, however, the move out of the Phoenix was strong enough that it managed to take the market back into the early afternoon congestion. When the second move higher did break, it was able to find support at the Phoenix's congestion and managed to reverse higher once more in the final hour of trading.

In the Dow Jones Industrial Average's ($DJI), 22 of its 30 components closed lower on Friday, led by the financials. American Express (AXP) lost 3.2%, while J.P. Morgan Chase (JPM) fell 2.9%. Merck & Co (MRK) also lost ground once again, falling 2.6%. Hewlett Packard Co. (HPQ) was the strongest stock in the Dow. It gained 3.4%, while Alcoa Inc. (AA) also posted gains and closed higher by 3%. The Dow as a whole lost 64.87 points, or -0.5%, to close at 12,182.1 with a weekly loss of 4.4%.



The S&P 500 ($SPX) also fell once more on Friday. It shed 5.62 points, or -0.4%, and closed at 1,331.29. The S&Ps ended the week lower by 4.6%. Some of the top losers included Micron Technology Inc. (MU) (-6%), Allergan Inc. (AGN) (-6%), and CIT Group (CIT) (-5.7%). Top gainers included Cognizant Technology Solutions (CTSH) (+16.7%), E Trade Financial Corp. (ETFC) (+7.3%), and Marathon Oil Corp. (MRO) (+6.7%).



The Nasdaq Composite ($COMPX) posted gains on Friday. It rose 11.82 points, or +0.5%, and closed at 2,304.85. On the week as a whole, however, it still lost 4.5%. Tech stocks received a boost from a buyback plan annouced by Amazon.com (AMZN), which lifted that company's shares by 3.7%. Other top stocks were XM Satellite Radio (XMSR) (+8.4%), Expedia Inc. (EXPD) (+5.7%), and Research in Motion (RIMM) (+5.6%).



In other markets, crude oil prices sky-rocketed on Friday with March delivery up $3.66, or 4.2%. It closed at $91.77 a barrel on the New York Merchantile Exchange after being pushed lower in recent trade. This was the largest daily gain since October and the contract ended the week higher by 3.2%. This move was attributed not only to oversold conditions into support, but also news from the Organization of Petroleum Exporting Countries (OPEC). Some of the delegates are pushing to cut production in March to help hold up prices due to lower demand and U.S. economic influences.

On the data front on Friday, the Commerce Dept. reported that U.S. wholesale inventories were up 1.1% in December. This was the largest gain since August 2006. Sales dropped 0.7%, which was the largest decline in nearly a year, with inventory-to-sales ratios now standing at 1.09. This ratio had been at a record low of 1.07 in November. The Commerce Department will release the retail inventory data next Wednesday, finalizing estimates for business sales and inventories for December. Fed Chairman Ben Bernanke will follow on Thursday, February 14 with his testimony on the economic outlook on Capital Hill in Washington.

In terms of price action this coming week, the market is slightly bullish on the 30-minute time frame, but this can easily just create a longer congestion zone on the 60-minute time frame before the market breaks lower for a better test of January lows in the S&Ps and Dow. This would create a two-wave correction off the highs of February 1, and if this second drop is slower than the first, then another daily pop in a couple of weeks is highly probable.

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.