The market was still choppy on Thursday, but intraday it experienced some very strong swings on the 15-minute time frames to offer some decent intraday moves in the indices. The day began on Thursday with the downside into the morning that I mentioned in yesterday's column. The Dow Jones Industrial Average and S&P 500 had gapped higher into the open, but they held those opening highs and fell into congestion. The Nasdaq Composite had gapped lower thanks to weakness in technology due in large part to disappointing numbers from Oracle (ORCL) and Google (GOOG). Nevertheless, it also fell into congestion early on. The downside bias remained in play and the indices broke strongly lower around 10:15 ET.

The selling pressure was very strong and the market fell quickly to new lows on the day and had soon busted through Wednesday's as well. The Nasdaq found strong support when it hit an equal move as compared to the move into the prior morning at about 10:30 ET. While not a typical correction period, all three of the major indices held lows at this time, but they pulled slowly off them to begin with. The upside momentum increased once a minor pullback into the 11:15 ET correction period broke higher, taking the indices through their 5-minute 20-period simple moving averages.

The upside accelerated into 11:45 ET and returned the indices into the early morning congestion. A nice bull flag formed at that resistance zone and was followed by another move higher into the early afternoon. Prior highs and the 5-minute 20-period simple moving averages served as resistance in each of the indices and the market was able to roll over once again.

The morning action essentially completed the move that I had been expecting to take the entire day on Thursday. It left the door open for the remainder of the day and the bias quickly turned lower when the market held resistance and then formed an Avalanche pattern along the 5-minute 20 sma. It broke rapidly lower once again, taking the market back to the morning lows, but the momentum slowed at that support, so the indices were able to bounce rather quickly.

The rapid bounce confused matters somewhat since it turned the momentum back to the bullish side, but when resistance again hit it pulled sharply of that level into the 15:00 ET correction period. It based there instead of forming more of a range back into that 5 minute pivot high. By pulling back and then basing, it created another Avalanche pattern, which led to yet another selloff into the last 45 minutes of the day. It took the indices back to the lower end of the 15-minute trend channel, as well as the 15-minute 200 sma in the S&Ps where it closed.

The Dow ($DJI) lost 120.40 points, or 1%, and closed at 12,302.46. 28 of its 30 components lost ground on the day. Leading the downside were Intel (INTC) (-3.5%), Bank of America (BAC) (-3%), J.P. Morgan Chase & Co. (JPM) (-2.8%), and Boeing Co. (BA) (-2.7%). The S&P 500 ($SPX) lost 15.37 points, or 1.1%. It closed at 1,325.76. Top decliners were MEMC Electronic Materials (WFR) (-10.1%), Lehman Brothers Holdings (LEH) (-8.9%), and Washington Mutual (WM) (-8.4%). The tech-heavy Nasdaq Composite ($COMPX) remained the weakest of the three indices, falling 43.53 points, or 1.9%, to close at 2,280.83. Some of the top losers were Apollo Group (APOL) (-7.5%), and Oracle (ORCL) (-7.2%).

As we head into Friday, the index futures are up strongly in afterhours trading. They have returned to the level of congestion prior to the final afternoon breakdown on Thursday. While this is resistance, the increased momentum has me favoring even more upside off the afterhours lows. I would like to see a longer daily range before the market can really take off from this congestion. A move into the upper end of the daily range and then another pull off it would be best for a larger breakout to highs in a week or so. The 20-day sma will serve as support throughout the congestion.







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.