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Market Continues Its First Daily Correction in 2006
By Toni Hansen | Published  01/17/2006 | Stocks , Futures | Unrated
Market Continues Its First Daily Correction in 2006

Good morning! I hope you had a wonderful extended weekend! Last week we saw the market finally begin to slow its monumental rally that had been under way since the start of the new year. On Thursday the market had its first lower close for the new year and that correction off highs continued into the weekend. Things slowed down considerably into the extended weekend, however, making for a choppy and higher risk session on Friday for intraday traders.





Friday got off to a slow start out of the open. A relatively flat open was followed by a continuation of the range that had been forming into Thursday's close. Instead of bouncing nicely off the lows of the range when they hit around 10:15 ET, the indices tried to slide through them. This was a bit too early for a strong breakdown because it was coming out of a shorter base on the 15 minute charts than had occurred Thursday morning and into Thursday's early afternoon breakdown. The result was that, even though the NASDAQ had a nice short setup, it wasn't able to establish a strong move before the market pulled back up into the range off of the 10:45 ET reversal period.



This added bounce on the 15 minute charts finally gave the indices enough of a correction from Thursday's descent that the highs of the 15 minute range and the 15-30 minute 20 sma zone held well. The market pivoted off this resistance back into the 5 minute 20 sma support. After basing along that support into 12:30 ET, it accelerated once more to the down side.  The market made new lows on the day before slowing as the S&P500 came into its 15 minute 200 sma and the Dow Jones Ind. Ave. hit its 10 day sma support at about 12:45 ET.



The remainder of the day had fairly light volume. The market had a choppy range with insignificant lower lows into 14:15 ET. At that point it started turning around and soon broke the 5 minute 20 sma resistance. It was able to continue the sloppy climb until coming back into the mid-day range and the price resistance that accompanied it.

I don't have a very strong bias going into this week. My opinion on the market hasn't changed much in terms of the larger time frames than expressed in my first column this year.  We still run the higher risk of this breakout on the daily charts pulling back into the 20 week sma simply because it was an earlier breakout than you will usually find ahead of a strong upside move. As a result, this breakout hasn't been that significant yet on the daily and weekly charts and the correction from the highs last week could easily continue into this. It doesn't look like it's going to be a sharp one though, and the action on Friday leaves room for a retest of highs for a possible double top or 2T type of double top on the daily charts.

Economic Reports and Events
Jan 16:-
Jan 17: NY Empire State Index for Jan (8:30 am), capacity Utilization for Dec (9:15 am), Industrial Production for Dec (9:15 am)
Jan 18: Core CPI and CPI for Dec. (8:30 am),  NY Empire State Index for Jan (8:30 am), Net Foreign Purchases for Nov. (9:00 am), Crude Inventories 1/13 (10:30 am), Fed's Beige Book (2:00 pm)
Jan 19: Building Permits for Dec (8:30 am), Housing Starts for Dec (8:30 am), Initial Claims 01/14 (8:30 am), Philadelphia Fed for Jan (12:00 pm)
Jan 20: Mich. Sentiment-Prel. for Jan (9:50 am)

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
Jan 16: -
Jan 17: ASO (B), CAL (B), CBH (B), DCN (?), FITB (B), FRX (B), IBM (A), INTC (?), LLTC (A), MDC (B), MOS (?), SIFY (B), SOV (A), TER (A), USB (B), WFC (B), YHOO (?)
Jan 18: DOX (A), AMR (?), AAPL (A), ASNL (2:00 PM), CIT (B), CNB (?), EBAY (?), FHN (A), HCBK (A), HBAN (B), HTCH (A), JPM (B), MEL (?), NTRS (?), PH (10:00 AM), QLGC (A), RDN (A), STX (A), LUV (B), SPSN (A), STT (B), STI (B), SNV (?), TCB (?), BK (B), VCP (B), WM (A)
Jan 19: BBT (B), BZH (B), COF (A), CMA (B), CREE (?), DHI (B), FFIV (?), FCS (B), FSL (A), GNSS (A), HDI (B), HYSL (A), IGT (?), NITE (B), MER (?), MCHP (A), MOT (A), NFB (?), NVS (B), PFE (B), RMBS (?), SFA (A), SLM (B), UNP (?), UNH (B), WB (B), XLNX (?)
Jan 20: AT (?), C (B), GE (?), JCI (B), KEY (B), RF (B), SLB (B)
Jan 23: AXP (?), ACF (A), ARBA (A), AV (A), BAC (B), CBST (A), ET (A), ETN (B), F (B), MSPD (?), PPC (B), SKM (3:00 pm ET), TXN (A)
Jan 24: MMM (B), ADTN (?), AGR (?), AAI (B), AKS (?), BJS (?), EAT (B), BNI (B), CA (?), CTX (A), CKFR (A), COH (B), GLW (A), CSX (?), DD (B), EMC (B), EXTR (A), GDW (?), HMA (B), JNJ (B), KMB (B), LAB (B), LXK (B), LU (B), NFLX (?), NOC (B), PPP (?), RFMD (A), RYL (A), STLD (?), STM (A), SUNW (4:30 pm ET), NYT (B), TMA (A), TDW (B), UTX (B), ZION (A)

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.