Good morning! The market had some better intraday action on Thursday as compared to Wednesday's narrow uptrend day. It was still a bit more whippy, but we saw some more decisive intraday moves beginning with a decent gap down into the open. This took the NASDAQ into price support from the lows of the channel that had been forming since Tuesday afternoon. It also broke the SP500 and Dow Jones Ind. Ave. out of that gradual uptrend channel we had seen since that time. Because the gap came into support from the prior day, however, the initial move into the open was not a continuation pattern for the breakout, but rather a pull higher to correct to the slower open and support zone.
The NASDAQ formed the best pattern out of the open with a breakout on the 2 minute all-sessions charts. Premarket lows were slightly lower and the range into the open was on a move up off those lows. This breakout triggered just before 10:00 ET coming out of the 9:45 ET reversal period and led to a closure of the gap in the NASDAQ. On the other hand, the SP500 and Dow saw a good deal of divergence from the NASDAQ. While the NASDAQ moved strongly out of the open, the SP500 and Dow took longer to pull off lows.
The market stalled with the 10:15 ET reversal period, creating a small pullback into 10:30 ET as volume declined. This formed a rapid continuation move to the upside when the range broke higher out of 10:30 ET. I had initially expected a longer correction at this point to create a better Cup with Handle on the 5 minute NASDAQ charts. Instead we saw a third wave of buying into the 10:45 ET reversal period which then exhausted the morning upside move and opened the door for a much greater correction heading into lunch.
The correction from morning highs was very rapid. The move was at a faster than average pace, although not faster than the last upside move. This meant that a trading range over noon, and most likely a triangle, would be the outcome of the pullback. We saw this form going into the early afternoon as the range narrowed dramatically before breaking lower at 13:30 ET in the NASDAQ and slightly later in the SP500 and Dow. We continued to see a strong divergence between the indices at this time, but the market began to hug support and favor a breakdown as volume continued to drop off.
The breakdown was swift and took the market back into the 11:00 ET pivot lows on the 5 minute charts before continuing lower as it held the 5 minute 20 sma resistance until the last 30 minutes of the day. At that point the Dow had put in an equal move on its 15 minute charts as compared to the initial morning drop and that support helped to form a longer correction on the 5 minute charts just before the close.
Heading into Friday I do not see a strong bias on the 30-120 minute charts. The market certainly still has more upside room on the daily charts, but with an equal move in on the 120 minute NASDAQ on the rally of the last three days compared to the move from the 30th to the 1st, there is a good chance for another day of corrective action first. This would most likely be another choppy trading day and hence another day of higher risk. Two of the new positions I am looking at acquiring are MRVL as a swingtrade buy and NTRS as a position trade buy on upside breakouts from the current range on the daily and the weekly charts.
Updates: Swingtrades: AMT from the 22nd and WLP from the 30th have trailing stops in place. AEIS from Monday has support at the 20 day sma. Position trades: HSP and CHRS long have support at the lows of the weekly bases.
Economic Reports and Events
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)
Sep 14: Retail Sales (8:30 am), Capacity Utilization (9:15 am), Industrial Production (9:15 am)
Sep 15: Business Inventories for Jul. (8:30 am), Core CPI for Aug. (8:30 am), CPI for Aug. (8:30 am), Initial Claims 9/10 (8:30 am), NY Empire State Index for Sep (8:30 am), Philadelphia Fed. for Sep (12:00 pm)
Sep 16: Current Account Q2 (8:30 am), Michigan Sentiment- Prel. for Sep (9:45 am)
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 date 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 09: -
Sep 12: CPB (B), ENER (?), PLL (A)
Sep 13: BBY (?), KR (B)
Sep 14: -
Sep 15: ADBE (A), BSC (B), PIR (?), TEK (?)
Sep 16: -
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.
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