The market ended the day lower once again on Thursday with more downside than I had been expecting following Wednesday's close. The market had actually managed to return back to Wednesday's intraday highs in the afterhours trading in the index futures, but a strong reversal pattern into midnight led to a steady downtrend in the premarket during the wee hours of the morning. This led to a slightly lower open in the S&P 500 ($SPX) and Dow Jones Ind. Ave. ($DJI), but the Nasdaq Composite ($COMPX) was relatively unchanged.

Ahead of the open the Labor Department reported its current jobless claims data. Initial filings for state unemployment benefits fell to the lowest levels since January 19th last week, falling 24,000 to 351,000. Continuing claims, however, climbed by 29,000 to 2.83 million in the week ending in February 23. This marks the highest level since September 24, 2005. This news, while certainly not at all promising for the economy, had very little immediate impact.

The market was not able to hold up for very long, however, past the opening bell. The opening price action left the indices vulnerable to a breakdown from the 15-minute trend channel, which was now more gradual on the upside on the intraday charts. This created a 15-minute Avalanche pattern into Thursday morning. The first wave of intraday downside came at about 10:00 am ET when the pending homes sales data came out.

Continued negative news from the housing front weighed heavily on the market on Thursday. Mortgage Banks Association reported record foreclosure levels in the fourth quarter of 2007, hitting the highest levels since the history of its survey. Loans which were delinquent, but not yet in foreclosure, tested levels not seen since 1985. Tied to the housing market was data from the Federal Reserve, which reported that the net worth of U.S. households fell by $533 billion at an annual rate of 3.6% last quarter.

Merrill Lynch (MER) fell 7% on Thursday after it reported that it was raising the conversation of some of the securities it sells. This came shortly on the heels of its announcement to get out of the subprime lending business. Ambac (ABK) also broke strongly lower on the daily time frame after Wednesday's announcement to sell $1.5 billion in stock in order to try to hold onto its AAA rating. It lost another 14.7% on Thursday.

After heading lower into 10:00 am ET, the market managed to bounce back a little bit. The 5-minute 20 sma in the S&Ps and Dow held as resistance, while the stronger Nasdaq retested the morning highs before it once again continued lower. The session as a whole was a very choppy one for the market. It stair-stepped lower throughout the day with each upside move on light volume and greater chop than each of the downside moves. The upside also took longer and nearly reclaimed of the previous move's losses before turning lower once again. The Nasdaq led the decline, but all off the indices plunged into the close, returning to the support from Tuesday's lows into the bell.

The Dow ended the session lower by 214.60 points, or 1.7%. It closed at 12,026. The financials were particular hard-hit. In addition to Merrill's losses, J.P Morgan (JPM) fell 2.5%, while Citigroup (C) fell 4.4%. All but one of the Dow's 30 components closed in negative territory. The S&P 500 lose even more than the Dow, dropping 29.36 points, or 2.2%, to close at 1,304, while the Nasdaq Composite fell 52.31 points, or 2.3%. It closed at 2,220. On the NYSE declining stocks outpaced advancers by 4:1, while they were nearly 5:1 on the Nasdaq.

Despite the weakness on Thursday, I am still favoring a range on the 60-minute into next week. Even on slightly lower lower, it would be easy to pull back up into the prices of the past couple of days. Congestion in these levels would then allow for a stronger break of the support. Either way though, the bias in the market on the daily time frame remains bearish, so I'll be looking at upside moves from a short term perspective only.

Dow Jones Industrial Average ($DJI)


S&P 500 ($SPX)


Nasdaq Composite ($COMPX)


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.