Good morning! Thursday was a pretty typical transition day in the market. It began with a continuation of the selling right away out of the gate, but this early morning decline in the first 15 minutes was very strong. It took the NASDAQ into that 100 day moving average support we were watching for, as well as dragging the SP500 back into the prior daily lows. While this wasn't a gap into that support as postulated in yesterday's commentary to lead to a larger intraday correction, the effect of that support hitting very early on in the day was the same. It opened the door for a larger break from the selling of the prior two days.

As that larger daily support hit, volume spiked on the 15 minute charts, indicating an intraday exhaustion move. We obviously weren't the only ones on the lookout for this support zone. The bounce back off it was a great deal stronger than you typically see after what was already a very rapid intraday move. Within half an hour the market was making new intraday highs, coming back into the 15 minute 20 sma zone intraday with only a small 1 minute Phoenix heading into 10:00 ET to help accelerate the correction off support. 
 

Unfortunately, since we now were faced with both a stronger than average decline on the 5-15 minute charts, as well as a stronger than average move back up off the lows, it meant a lot higher odds for a range with those two pivots serving as support and resistance throughout the rest of the day. To me, this also indicated that risk would be greater on 5-15 minute pattern and breakout setups since we'd be dealing more with pivots and smaller 1-2 minute reversal and continuation patterns. I don't follow equities as much for these setups since they are often more scalpish, so my focus was again on the EMinis for most of the day. 

The move lower out of the 10:15 ET reversal period off the 15 minute resistance was still stronger in terms of pace, but was the most gradual move back into lows that we had seen since Tuesday's highs. I had initially looked at it for three waves of selling on the 2 minute charts. Your typical trend move will take place with three waves of buying or selling with comparable corrections between them, or you get them in sets of two, where you have two moves, a longer correction, and then another two move continuation.

Since the correction after the second drop into 11:00 ET was nearly the same as the prior one on the SP500, only breaking the trend line in the NASDAQ, I missed out on seeing it as the latter trend pattern until too late for that 12:00 ET 2 minute continuation, but it did make the pivot off the morning lows a lot stronger when that created an equal move on the 5 minute charts as shown on the NASDAQ. That strong intraday support combined with the daily support we had already seen near the open to turn the market over more quickly into the early afternoon.

The initial resistance on the way back up was the 5 minute 20 sma. As that broke going into 13:00 ET, without more than just a few minutes of stalling, it helped fuel the upside pace. With the market having already attempted to break the 15 minute 20 sma earlier in the day, that became less of a barrier this time around and, like we saw the prior afternoon, the previous pivot highs would again be the magnet for this rally. It took another small 1-2 minute bull flag out of the 13:30 ET reversal period to bring the NASDAQ up to that level, but the resistance held perfectly.

This early afternoon rally helped to create some strongly rounding lows intraday on the 15-30 minute charts, and it made risk for the remainder of the day a great deal higher risk. This is because such rounding off is typically followed by more of a range and there wasn't a great deal of time left in the day for this to happen and still be able to break out strongly before the close. The last 15 minute rally took nearly 90 minutes to move from lows to highs, making it best for the market to rest for 1 1/2-2 times as long to allow for another strong upside move. We did get a little but of an cup with handle on the 2 minute charts as the market came off the 15 minute 20 sma support, making an early attempt to break out of that range, but it wasn't enough to clear the intraday resistance from the day's highs before the close.

Going into the weekend the odds of the zone at lows holding on the week are pretty strong at this point. If the market had been able to hold the base a bit better by continuing the gradual pullback into the close, it would have helped turn the pace over more to the bulls on Friday morning to better secure this position given that volume was lighter as that correction into 14:00 ET kicked off. The light volume meant that there was not a lot of panic to get out even though the market was pulling in.

We can still get an upside continuation on Thursday's late day breakout attempt, but the early trigger adds additional risk for another range bound day. This is because those that bought near the highs on Thursday afternoon looking for a greater correction off the daily support will more easily panic if the market does not continue higher right away out of the open. So, while my bias at the moment is to hold this daily support into the weekend, I am pretty open at this point when it comes to intraday direction and will rely very strongly on the pace of the moves out of the open for guidance.

Updates: Swingtrades: VRTX long from last Monday has support with the 20 day sma. This trailing stop does have a decent chance of hitting on Friday since, despite relative strength over the previous several days, it was unable to correct with the rest of the market Thursday afternoon. Position trades: HSP and CHRS long have support at the lows of the weekly bases. CHRS stopped out some folks on Tuesday, but is holding the 20 week sma support. I am looking at acquiring NTRS as a position trade buy on upside breakouts from the current range on the weekly chart, but it needs to hold the 20 week sma level to stay on my watch list. HCA was added to the position trade short watch list at the start of this week and has been heading rather quickly into the initial 20 month sma target. Trailing stops can be used at this point. 

Economic Reports and Events
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. 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.