Good morning! The day began on Tuesday with the continuation of the narrow range action that we were looking for. After a bit of selling out of the open, the market bounced back to the highs of the range from the Monday before falling back into the late morning. The indices had a small short pattern at the 11:00 ET reversal period with a 2T double top in the stronger NASDAQ and a small Avalanche pattern on the SP500 and Dow Jones Ind. Ave.

This late morning selloff took the indices back into 15 minute 20 sma support. From there the NASDAQ managed to rally through morning highs to put in an equal move on both the intraday charts as compared to the rally out of 9:45 ET as well as the Monday morning rally. This resistance hit at the 12:00 ET reversal period as the SP500 and Dow both came back into highs. From that point on, the pace began to turn over.

Going into the day, while I was looking for morning congestion and a late day breakout, I had been expecting that breakout to be a move higher. The action Tuesday morning with the NASDAQ moving higher while the SP500 and Dow kept the range took out a lot of the potential on the upside since the SP500 and Dow obviously had no intention of participating. The market began to favor a strong late day breakdown when the indices pulled back into the 5 minute 20 sma and hugged that moving average into 13:30 ET, creating a double top in the NASDAQ intraday and a triangle short pattern in the SP500 and Dow by hugging the lower trend channel as volume significantly declined.

The breakdown began gradually, but picked up speed after forming a small bear flag into 14:30 ET. This took even the NASDAQ into new intraday lows and brought the SP500 and Dow into their 15 minute 200 sma support intraday. Despite the larger time frame support, however, the selling continued strongly into 15:00 ET with the volume continuing to increase, showing a truly bearish inclination. This gave us our strong afternoon trend move and the selling continued into the close, although the pace slowed as the NASDAQ came back into the trading range from Friday.

Going into Friday my bias is going to remain more bearish. Even though we did have a very strong intraday move, the daily charts now still have a great deal of room to move on those larger time frames since the bias has definitely turned. The Dow is forming a descending triangle after the rounded lows into the end of summer and now is continuing to favor the lower end of the range, even though it did pull up more than I was initially looking for. While some intraday corrective action is typical, the market has room to put in a 2 1/2 day downtrend move with the 15 minute 20 sma as resistance throughout.

Updates: Swingtrades: VRTX from the 12th hit targets and is now closed with a trailing stop for those not taken out with an earlier trailing stop into the 20 day sma. UFPI long from last Monday will have support at the 20 day sma. FRK from last Tuesday hit trailing stops after a strong upside move. Position trades: HSP and CHRS long have support at the lows of the weekly bases. CHRS stopped out some folks on last 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.