Good morning! Monday was a rather uneventful day for the market. Most of the action occurred out of the open when upside for the first 20 minutes or so took the indices to new highs since the pivot lows just over a week ago. This attempt at a breakout on the 15 minute charts was unable to sustain itself, however, once the 10:00 ET economic data came out. The Institute for Supply Management's index of factory activity rose nearly 5.8%, greatly ahead of the forecasted decline to 52.1%. While this seems like good news, it also means that the Fed will have little reason to slow rising interest rates. The market did not receive the news kindly. Additionally construction spending saw a rise of 0.4%, which was half the expected increase, although July's report was revised by +0.3%.

The market decline off morning highs was comparable to the rally to highs, hitting support at the opening levels. The NASDAQ saw the best relative strength after a stronger move out of the open and managed to hold onto its 5 minute 20 sma when the 10:15 ET reversal period hit. The weaker SP500 and Dow Jones Ind. Ave., on the other hand, formed continuation patterns to lead to a decline into the 10:45 and 11:00 ET reversal periods. This took them back to the lower end of Friday's range where they found strong price support heading into noon. Both retraced back to their 5 minute 20 sma resistance before falling into a narrower range into the afternoon.

From the late morning resistance, the market slid back down to the prior lows. The pace was slower than the initial descent out of 10:00 ET and allowed for a pivot setup out of 12:30 ET. Nevertheless, for the rest of the day the market was unable to muster enough strength to form anything other than scalping action into the close. The range set by the morning trading held for the remainder of the day without being able to form a strong bias one way or the other for a breakout.

While the daily charts of the indices are coming back to the upper end of the range, there is still a bit more room they can go before the daily Commodity Channel Index becomes overbought once more. At the same time, the market bias intraday could hardly be considered favorable for the bulls after the morning decline on Monday and a close that was barely off the lows of the day. If I had no choice but to place a bet, I would expect a shallow, but choppy decline for Tuesday morning with room for a larger move higher in the afternoon. With a lack of strong swingtrade setups forming, I'll be relying on intraday action for new positions on shorter time frames. Over the last two trading days the market overall has been very scalpish. I'll use that same approach on Tuesday until the market begins to show stronger intraday trends and a break in the range.

Updates: Swingtrades: VRTX from the 12th hit targets for those not taken out with a trailing stop into the 20 day sma. UFPI long from last Monday will have support at the 20 day sma, while PWAV long from last Monday hit trailing stops. FRK from last Tuesday should be managed with a trailing stop. 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. It has bounced off the 20 week sma and now needs a daily setup to form. HCA as a position trade short from 9/20 hit trailing stops for a swing, but a larger position trade target is in the $43 zone. 

Economic Reports and Events
Oct 04: Factory Orders for Sep (10:00 am)
Oct 05: ISM Services for Sep (10:00 am), Crude Inventories (10:30 am)
Oct 06: Initial Claims 10/01 (8:30 am)
Oct 07:  Average Workweek for Sep (8:30 am), Hourly Earnings for Sep (8:30 am), Nonfarm Payrolls for Sep (8:30 am), Unemployment Rate for Sep (8:30 am), Wholesale Inventories for Aug (10:00 am), Consumer Credit for Aug (3:00 pm)
Oct 10: -
Oct 11: FOMC Minutes (2:00pm)

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
Oct 04: -
Oct 05: RI (A), SLR (?), YUM (B)
Oct 06: CAN (A), ATYT (B), STZ (A), COST (?), MAR (B)
Oct 07: -
Oct 10: AA (A), DNA (A), NGAS (?), PKX (B)
Oct 11: AAPL (5:00 pm ET), GCI (B), LPL (?)

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.