After a strong late day rally on Wednesday afternoon, the market continued higher at the start of the day Thursday. Highs were hit within the first 20-25 minutes of the day before we saw a strong pivot into the 5 minute 20 sma and then the 15 minute 20 sma support. This larger time frame support held pretty well as the SP500 and Dow Jones Ind. Ave. both rounded off to allow for a stronger bounce off the support than you would usually see with such a steep decline.

The pace continued to pick up as the indices pulled back into morning highs. If that had held, we could have had a better chance at a breakout later in the day in the direction of the trend. Instead, the market tried new highs too quickly just before noon and created 2T type of action as the Dow hit the 30 minute 200 sma and the market turned around into the early afternoon. This occurs when the market creates only a slightly higher high and traps eager bulls, only to then turn back around.

The mid-day selling picked up heading into the early afternoon, stalling initially at the 5 minute 20 sma, but not enough given the larger time frame rally. The moving average gave way and was followed by a 5 minute Bear Flag going into the 20 sma at 13:30 ET. Volume dropped off nicely as the market moved into that resistance level before breaking lower into the 14:00 ET reversal period. This hit at the same time as trend channel and 30 minute 20 sma support, stalling the selling going into the last two hours of the day.

While the pivot held well at 14:00 ET, risk increased heading into the close as the market started to show a lot more overlap in prices from bar to bar. The price zone from the prior Bear Flag served as resistance and initially the market based there to create the start of a choppy Phoenix pattern as volume remained light. It was unable to break higher at the critical 15:30 ET reversal period, however, which was the last one of the day. Instead the market just continued to base into the close, making it a bit more bearish at the end of the day.

With the extended holiday weekend, I expect a pretty slow session on Friday. The most action is likely to come off the earning morning jobs data. Even with higher risk on Thursday, we still saw some very nice intraday action in individual stocks. It will be even more difficult though as people begin to head out early to get a jump start on weekend plans. Of course, with gas issues right now, some folks may be modifying those plans! I anticipate that I will be among those wrapping up early myself to go do something more constructive, i.e. cleaning my house... Hey, I didn't say it would be more fun! Seriously though, you will want to be very careful not to overtrade, which is a large issue for many people when things are slow.

Updates: AMT from last Monday has support at its 20 day sma. WLP broke higher on Tuesday out of the daily triangle and has support under Monday's lows. HSP, which I've been following for a few weeks and has had several strong days is testing the upper end of it's weekly range for upside breakout potential. I am watching CHRS as well.

Economic Reports and Events
Sep. 02: Average Work Week for Aug. (8:30 am), Hourly Earnings for Aug. (8:30 am), Nonfarm Payrolls for Aug. (8:30 am), Unemployment Rate for Aug. (8:30 am)
Sep 06: ISM Services for Aug. (10:00 am)
Sep 07: Productivity -Rev. for Q2 (8:30 am), Fed's Beige Book (2:00 pm)
Sep 08: Initial Claims 09/03 (8:30 am), Wholesale Inventories for Jul (10:00 am), Consumer Credit for Jul (3:00pm)
Sep 09: Export Prices ex-ag. for Aug. (8:30 am), Import Prices ex-oil for Aug. (8:30 am)
Sep 12: -
Sep 13: Core PPI for Aug. (8:30 am), PPI for Aug. (8:30 am), Trade Balance for Jul (8:30 am), Treasury Budget for Aug. (2:00 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Sep. 02: -
Sep. 05: -
Sep 06: -
Sep 07: ABS (?), HOV (A), NAV (B), COO (A)
Sep 08: BRL (B), NSM (?), SHLD (B)
Sep 09: -
Sep 12: CPB (B), ENER (?), PLL (A)
Sep 13: BBY (?)

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.