Good day! Thursday brought with it a nice morning for further downside in the market, continuing the selling of the prior two days, but very few downtrends last for more than 2 1/2-3 days without breaking the 15 minute 20 sma and this was true yesterday as well. The day began with a very slight upside open, but the 5 minute 20 sma held and the market sold off for the first 15 minute of the day. As the market came into price support from the prior 5 minute lows though, we saw a brief reprieve with the NASDAQ puling back into its 5 minute 20 sma resistance as the Dow Jones Ind. Ave. and SP500 formed double tops on the 5 minute charts for reversal patterns to lead to more downside as the morning continued.

The selling created a small Bear Flag on the 5 minute charts heading into 110:00 ET. This led to another wave of selling ahead of mid-day doldrums. We saw an exhaustion bar form just after 11:00 ET though as volume spiked, allowing for relatively easy timing of lows since the prices were also hitting SP500 equal move support on the 5 minute charts as compared to the drop into the Bear Flag.

I figured initially that the pace of the morning selloff would lead to more of a range over noon with even further downside into the afternoon on a potential trend day. While this held true initially as volume dropped heading into noon, at the 13:00 ET reversal period the smaller 5 minute trend channel broke higher, triggering an early afternoon rally which continued into the 14:00 ET reversal period. As that hit, the SP500 and NASDAQ came into morning price resistance at highs while the Dow hit its 5 and 15 minute 200 simple moving averages, creating a pivot off highs into the last two hours of the day.

The pace on this correction from afternoon highs was very slow though as the indices held 30 minute 20 sma zones, forming Phoenix patterns in the form of Cups with Handles on that time frame going into Friday. This leaves me a bit more bullish heading into the day.

ANF, WLP and PRU are still holding support while OSTK, GOOG and CECO continued to move lower intraday Thursday.  Overall I would use added caution on new shorts right now given that the market is hitting support on the daily charts and the intraday charts are looking higher. A lot of folks were awaiting INTL news overnight as well which will affect semis and related sectors.

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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.