Good morning! As we look at the trading action going into the week, the indices are falling into the triangle pattern we were examining as a strong possibility a few weeks ago. This was due to the increase in pace on the upside coming off the lows of last month. By pulling up slightly stronger than the prior drop, but by still having a good deal of room to move before the prior highs, those highs served as strong price resistance. The market has been correcting more gradually since that pivot last week, although intraday we've seen some stronger bouts of selling. One of those came on Monday.

After two days of corrective action to the selling on the 13th-15th, the NASDAQ Comp. held the 15 minute 200 sma resistance that had hit on Friday into the close while all three of the major indices held the 10 day sma resistance. We saw a slight gap down into the open to start the day on Monday and it was nearly all downhill for the remainder of it. The selling continued right away and lasted for just over half an hour before putting in a correction on the 5 minute charts. 
 

Some initial support hit at about 10:10 ET when the Dow Jones Ind. Ave. came into its 200 sma on the 5 minute charts, as well as Friday's lows. At that point the market fell into a slightly inclining base into the 5 minute 20 sma resistance. Volume decreased during this time to indicate a lack of true buying. When the 10:45 ET reversal period hit, the market began to decline once again, quickly breaking the lows of the range. This second intraday selloff on the 5 minute charts continued until the market had put in an equal move as compared to the prior selloff on that time frame, which I have marked on the NASDAQ chart. The NASDAQ hit that level first and held just after 11:30 ET, while it took the SP500 and Dow about 10 minutes longer.

The indices put in a longer correction over noon, pulling up to the 5 minute 20 sma once more before falling into a range at that resistance level. Volume dropped off sharply as both the bulls and the bears waited on the sidelines for the end of the mid-day doldrums. This came at about the 14:00 ET reversal period, a typical breakout time zone. The selling was a bit more subdued this time around since the correction over noon was only long enough to account for the second wave of the morning. The NASDAQ decline held the 14:30 ET reversal period, although the SP500 and Dow were able to continue into the 15:30 ET reversal period. Nevertheless, all three indices saw a retracement back into the mid-day range going into the close.

We are heading into a Fed day on Wednesday and this has the potential to create a more choppy, range-bound day on Tuesday. There is a decent amount of daily moving average support here in the indices and the Commodity Channel Index is neutral. Should the daily charts be able to continue this gradual daily pullback for a few more days, then it has the strong potential for a breakout on the daily and weekly charts with a triangle breakout. I would prefer to see volume decline as well into about the 100 day sma.

Updates: Swingtrades: VRTX from last Monday has support under the 20 day sma. Position trades: HSP and CHRS long have support at the lows of the weekly bases. I am looking at acquiring NTRS as a position trade buy on upside breakouts from the current range on the weekly chart. I am also adding HCA as a position trade short to watch for a weekly Avalanche setup as this trend channel at the lows of the last two months gives way.

Economic Reports and Events
Sep. 19: -
Sep. 20: Building Permits for Aug. (8:30 am), Housing Starts for Aug. (8:30 am), FOMC-policy announcement (2:15 pm)
Sep. 21: -
Sep. 22: Initial Claims 09/17 (8:30 am), Leading Indicators for Aug. 810:00 am)
Sep. 23: -
Sep. 26: Existing Home Sales for Aug. (10:00 am)
Sep. 27: Consumer Confidence for Sep.. (10:00 am), New Home Sales for Aug. (10:00 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 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. 19: APOL (B), NKE (B)
Sep. 20: CC (B), GS (B)
Sep. 21: BBBY (?), BMET (B), KMX (B), COGN (?), FDX (?)
Sep. 22: COMS (A), FINL (4:15 pm ET), GIS (B), KBH (B), ORCL (A), PALM (A), RAD (?), TIBX (A)
Sep. 23: -
Sep. 26: JBL (A), WAG (?)
Sep. 27: -

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.