The market ran hard into the upside from the 17th into the 24th, but unfortunately this momentum surge left it without enough fuel to continue the move as the week progressed. The indices needed time to correct, but they brushed off all traces of negative news, holding onto a significant portion of the larger time frame rally heading into Friday morning.

Trade was very choppy from Tuesday onward, making it difficult to locate a lot of sustained intraday momentum, even in individual equities. Sure, a few names stood out, like Apollo's (APOL), which experienced a strong mid-day breakdown on Thursday that really fell apart into Friday, but for the most part it had been a scalpers market. This remained the case throughout the first half of the day on Friday as well. As the session wore on, however, this began to change.

The personal income and consumer spending data was released ahead of the open on Friday. In February, income rose 0.5%. Meanwhile, the Commerce Department announced that real consumer spending has risen less than 0.1% since November. Consumer prices rose 0.1% in February, as did core consumer prices which exclude food and energy costs. Over the past year consumer prices are up 3.4%, while core consumer prices are up 2%. This combination has led to an increase in the growth of personal savings. This trend is expected to continue due to continued fear about the economy. The impact of this information on the market as a whole, however, was nominal.

As I mentioned Thursday, I was expecting more upside to continue an afterhours rally heading into Friday morning. The market must have felt obliged to follow through at least to some degree, because it opened with a decent gap higher. A gradual pullback off the open created a continuation pattern on the upside and the indices moved to new intraday highs into 10:00 ET.

The Michigan consumer sentiment index came out a few minutes early, showing a decline from 70.8 in February to 69.5 in March. It had been expected to decline to between 69.6 and 70. This is viewed as confirmation of a recession. Despite the appearance of unfavorable news, the market still managed to rally. It was the last rally of such a magnitude throughout the remainder of the session. The market turned over shortly after 10:00 ET and remained in a downtrend into the closing bell.

After turning off highs, the indices pulled back into the lower end of the day's range. A very gradual correction off the price support created a large two-wave continuation pattern for a selloff into the afternoon. The 15 minute 20 period sma served as resistance and the 12:00 ET correction period helped kick off the breakdown. Once the support gave way, the 5 minute 20 sma held as resistance for the entire afternoon as a series of small 5 minute bear flags took the market continuously lower into the end of the day.

The market did manage to bounce somewhat into afterhours trading, but the Dow still posted a loss of 86.06 points, or 0.7% on Friday. It closed at 12,216. The S&P 500 lost 10.54 points, or 0.8%. It closed at 1,315. The Nasdaq Composite shed 19.65 points, or 0.9%. It ended the day at 2,261. As the market wraps up the first quarter of 2008, the Dow is down 7.9% on the year, while the S&P 500 has lost 10.4%, and the Nasdaq Composite has dropped 14.7%. Earnings season for the first quarter begins in about a week when Alcoa (AA) reports on April 7th. I am looking for a bit of upside in the market into Monday morning, but the increase in the downside into Friday afternoon was a bit of a disappointment and will most likely draw out the daily correction longer on a daily time frame.

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.