Good morning! Well, looks like I should have stuck to my bias from the early afternoon on Wednesday! At that point I was looking for a jump in prices Thursday morning, but the increase in the downside pace in the SP500 and Dow Jones Ind. Ave. into the close led me to expect further selling into the open.

A wave of economic data that came out in the premarket really turned things around from the prior afternoon's weakness. Personal incomes increased 0.4%, in line with expectations, and real, inflation-adjusted spending increased 0.1% in October. This marked the first increase in three months. Consumer price rose 01.% in October, while on the jobs front, first-time claims for state unemployment benefits fell 17,000 to 320,000 last week. This was larger than anticipated and was quickly welcomed by the market bulls.

The morning began on Thursday with strong upside gap following the 8:30 ET news. It opened above the 5 minute 200 sma support in the NASDAQ and the 15 minute 20 and 200 smas in the Dow. Both support zones helped hold up the market into the open. Since the NASDAQ had the least resistance intraday, however, it was able to continue the rally at a stronger pace right away in the morning. The SP500 and Dow also moved up, but the 5 minute 200 sma in their cases was just overhead and held them back a bit.

The buying picked up in the SP500 and Dow after they pulled back to the 5 minute 20 sma. The stronger NASDAQ now needed time to correct on the market time frames, while the other two were not yet as extended and could make new highs on the morning more easily. Both did so gradually, however, holding back while the NASDAQ corrected into lunch. A smaller base at highs in all three indices just after noon finally broke all three higher once more just before 13:00 ET.

One of the drawbacks to the early afternoon breakout was the pace within the range. The market moved more gradually out of the 11:30 ET pivot than it had into it, particularly in the NASDAQ. This made it difficult for the breakout to pick up steam. The slower crawl increased the risk for the bulls as the SP500 and NASDAQ hit the prior daily highs just after 13:30 ET. It was not an exhausted enough move to flush out most of the earlier buyers, but the indices were able to pull back quickly to the 5 minute 20 sma before stalling. This tug of war between the bulls and the bears created a choppy trading range on the 5 minute charts that lasted throughout the remainder of the session.

The strong rally on Thursday has made me switch modes a bit. I was hoping to see a greater daily correction in the indices, leading to a base lasting for about a month, followed by an upside continuation breakout. I still think this is possible, but the market looks like it might try new highs once more first, at least in the NASDAQ. I am not looking to add too aggressively to long positions at this time, but will remain on the lookout for larger pullbacks to do so on more position trades since the longer term bias is currently a lot more bullish.

Economic Reports and Events
Dec. 2: Average Workweek, Hourly Earnings, Nonfarm Payroll, and Unemployment Rate for Nov. (8:30 am)
Dec 07: Crude Inventories 12/2 (10:30 am), Consumer Credit for Oct. (3:00 pm)
Dec 08: Initial Claims 12/03 (8:30 am)
Dec 09: Mich. Sentiment-Prel. for Dec (9:45 am), Wholesale Inventories for Oct. (10:00 am)
Dec 12: Treasury budget for Nov. (2:00 pm)
Dec 13: Retail Sales for Nov. (8:30 am), Retail sales ex-auto for Nov. (8:30 am), Business Inventories for Oct. (10:00 am), FOMC policy announcement (2:15 pm)

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
Dec. 2: -
Dec 07: HOV (A), PLL (B)
Dec 08: COST (?), CMOS (?), NSM (?)
Dec 09: -
Dec 12: -
Dec 13: ADCT (A), BBY (?)

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.