Good morning! It took awhile intraday, but the market changed pace on Wednesday to allow for the continuation of the rounded highs on the daily charts and the Head & Shoulders pattern that the NASDAQ had been forming. Before it could selloff, however, the market needed a more gradual correction off 30 minute lows. It did this throughout the morning and into the early afternoon with the S&P500 and NASDAQ falling into a converging trading range on the 5 and 15 minute charts. The Dow Jones Ind. Ave., thanks to the drug sector, had a great deal of relative strength and ignored the weakening in the rest of the market until about 12:30 ET, when it also began to slow down intraday and pulled into the lower end of its 5 minute trend channel.

After basing along support on the 5 minute charts into 13:00 ET with very light volume, the bears took over. Selling hit very quickly once the support gave way and it was not long before the market was making new lows on the day. The NASDAQ saw the hardest selling, but it also had the best daily setup for the bears. By the end of the day it was back at mid-November highs which served as support.

Before it could get there though, the indices stalled going into the 14:00 ET reversal period. The S&P500 was hitting its 15 minute 200 sma and the NASDAQ had put in an equal move on the 15 minute charts as compared to the prior intraday decline. This slowed the selling the most in the NASDAQ, which based into the 5 minute 20 sma before it could continue. The S&P500 and Dow also both formed small 5 minute continuation patterns, but they did not take as long to correct before breaking to new lows.

The longer base from 14:00-15:00 ET in the NASDAQ that took place while the S&P500 and Dow were making new lows allowed for stronger follow through in that index in the last hour of the day. Essentially, it was not as exhausted as the others. The S&P500 and Dow both continued to break down, but did so to a much lesser degree than the NASDAQ. The S&P500 was closing in on prior daily lows by the end of the day, while the Dow was hitting its 10 day sma and the 15 minute 200 sma. These helped slow the selling until the NASDAQ hit its larger daily support.

On Tuesday we have room for more downside based upon the daily charts. Things are pretty extended intraday though, so if the selling continues into the open, I would expect the lows of the first hour to hold throughout the rest of the morning. As the week progresses we should see volume continue to decline heading into the extended weekend. Upcoming support for the market is the 50 day sma in the NASDAQ and the prior daily lows on the Dow and S&P500.

Updates: NCI and PWAV from the 7th have continued to correct. PWAV hit adjusted stops on remaining shares if using the 20 day sma for support. RAVN has also been correcting and has support at the 50 day sma zone. NTRS, which I have from mid-October as a position trade long is pulling in a bit after making new highs last week. The 20 week sma and 100 day sma are support. HSP, a position trade from early September, is currently basing again and also has support at its 20 week sma zone. I remain cautious on new swingtrades at this time as we round out the holiday season. I'll start to focus on them once again after New Year's.

Economic Reports and Events
Dec 20: Building Permits for Nov. (8:30 am), Core PPI for Nov. (8:30 am), PPI for Nov. (8:30 am)
Dec 21: Chain deflator-Final for Q3 (8:30 am), GDP-Final for Q3 (8:30 am), Crude Inventories 12/16 (10:30 am)
Dec 22: Initial Claims 12/17 (8:30 am), Personal Income for Nov. (8:30 am), Personal Spending for Nov. (8:30 am), Leading Indicators for Nov. (10:00 am)
Dec 23: Durable Orders for Nov. (8:30 am), Mich. Sentiment-Rev. for Dec (9:45 am), New Home Sales for Nov. (10:00 am)
Dec 26: -
Dec 27: -

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 stock's earnings date 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 20: MWD (B), NKE (A), PALM (A)
Dec 21: COMS (A), ATYT (?), BBBY (?), BMET (B), KMX (B), COGN (A), CMC (B), FDO (B), FDX (?), FINL (?), JOYG (B), PAYX (A), RHAT (A), RIMM (?), TIBX (A)
Dec 22: CTAS (B), CAG (B), GIS (?), GPN (B), SLR (?)
Dec 23: -
Dec 26: -
Dec 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.