Good morning! The 60 minute 2B reversal pattern we have been following in the S&P500 held well going into Thursday morning as the market gapped higher into the open. As shown on the daily charts though, it was really the Dow Jones Ind. Average that finally dared to peek its head out after last weeks strong decline. Caterpillar (CAT) and Honeywell International (HON) both posted strong fourth-quarter earnings results and these Dow components helped that index serve as the relative strength leader throughout the session.

Although the premarket jobless claims and durable goods orders came in slightly better than expected, the index futures actually began to fall off premarket highs well before that data was released. This correction continued into the open. A base at opening levels in the NASDAQ was followed by a continuation of the premarket correction off highs as the weakest of the three main indices fell rapidly into the prior day's close.

The closure of the gap served as strong support for the NASDAQ, hitting at the same time as the Dow ran into its 5 minute 200 sma on the all sessions charts and price support from Tuesday and Wednesday's highs. The S&P 500 also found support from prior 15 minute highs and the 5 minute 20 sma. All of these levels converging at once facilitated a decent pivot, which eventually led to new highs on the day and a retest of the upper trend channel on the 60 minute charts in the S&P500 and NASDAQ Composite. This rally came in the form of a 5 minute cup with handle on the NASDAQ, a triangle on the S&P500 and a 5 minute range breakout in the Dow.

The remainder of the day was pretty similar to the action from the first half of the week. The 12:00 ET reversal period held perfectly with a strong doji reversal on the 5 minute charts and shooting star reversal pattern on the 15 minute charts. This was right off the premarket and prior daily highs on the NASDAQ.

The selling was about as strong as the rally had been and that meant higher odds of a range holding on the 15 minute charts into the close. Three small waves of selling on the 5 minute charts were followed a pivot off the S&P500 and Dow's 15 minute 20 sma support. A shallow Phoenix along the 5 minute 20 sma followed. The stronger Dow was able to bump back into the mid-day highs, but the S&P and NASDAQ fell a bit short by the time the last reversal period of the day hit at 15:30 ET.

Concerns expressed in yesterday's column remain valid heading into Friday. The risk remains that this is a temporary correction ahead of a better test of 100 day sma support in the indices. As things stand right now though, the 2B on the 60 minute charts from Wednesday afternoon is looking to hold into Friday morning.

Sector Highlights from Thursday
Gainers included semiconductors ($SOX +2.9%), internet stocks ($GIN +1.8%), banks ($BKX), brokers ($XBD +2.5%) and computer software ($GSO +1.3%). Networkers lost their favor ($NQX -1.3%), while utilities continued to show weakness ($UTIL -0.9%). Airlines ($XAL) also had a difficult day.

Remember: As this earnings season progresses, be sure to pay closer attention to when earnings are due for any open positions you may have. While there are exceptions, it can be quite dangerous holding a shorter term position into an earnings announcement.

Economic Reports and Events
Jan 27: Chain Deflator-Adv. For Q4 (8:30 am), GDP-Adv. For Q4 (8:30 am), New Home Sales for Dec (10:00 am)
Jan 30: Personal Income for Dec (8:30 am), Personal Spending for Dec (8:30 am)
Jan 31: Employment Cost index for Q4 (8:30 am), Chicago PMI for Jan (10:00 am), Consumer Confidence for Jan (10:00 am), FOMC policy statement (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 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 27: BDK (B), CVX (B), CX (B), FPL (?), GCI (B), ITT (B), MAN (B), NTY (B), NUE (?), PG (B), TROW (B), UCBH (?)
Jan 30: ATHR (4:00 pm ET), CHKP (B), CMI (B), EK (B), XOM (?), FISV (A), KFT (A), MAT (B), RSAS (A), SGP (B), SII (B), SYY (?), TSN (B), UNM (A), ZMH (A)
Jan 31: ACE (A), ADPT (?), ASD (B), ARTG (?), CCJ (?), CB (A), CIN (?), CEG (?), CAM (B), COCO (B), CFC (B), CYMI (A), ELN (B), ETR (B), FLEX (A), GOOG (?), HLT (B), ITW (08:00 am ET), RX (B), ISSX (A), JBLU (B), K (B), MRK (B), SEPR (B), SIE (A), SGTL (A), STN (?), SYMC (?), TE (B), ERICY (01:30 am ET), ALL (A), X (?), VLO (?), WYE (?), ZHNE (A)
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance. Occasionally changes will occur that are made after the posting of this column.

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.