Good morning! The market had a slow, but primarily bullish day on Monday. The indices gapped higher into the open with declining oil prices and better-than-expected earnings from Lowes (LOW). Buying continued at a steady pace into last Thursday's highs. The price resistance hit at about the same time as the 10:00 ET new homes data came out. With the slowdown in new homes hitting its lowest levels in a year, the market immediately reacted sharply to the downside, pulling back near opening levels. That support held well, however, and the major indices stalled and fell into a range as the morning progressed.

The volume on the day began on the light side given the gap, which is unusual, and continued to drop off throughout the morning. At 11:00 ET the market began to break higher once more. Only then did we see more activity come in. A sharp rally off the 5 minute 20 sma support led to new highs on the day, particularly in the NASDAQ, which had been underperforming. As a result, however, it had the most upside room to move without resistance. This rally lasted about half an hour before the buying subsided into lunch.

The "Mid-day Doldrums" took their nickname to the extreme on Monday. The volume was extremely light, on par with pre-holiday trading, and a very narrow range formed at highs. Given the extent of the upside move thus far, a strong continuation breakout would have needed a base of about a day and a half. This set the market up for a false breakout attempt into the early afternoon as the indices closed in on their 15 minute 20 sma resistance.

The trap came with the 14:00 ET reversal period, making it even more easy for traders to get stuck in it since most real breakouts also take place at that time. The only real key for recognizing the added risk this time around came from looking at the larger 15-30 minute charts. Within just a few minutes of breaking the upper trend channel the market flushed out the buyers, dropped quickly for a brief break lower before pulling gradually back up into the 15:00 ET reversal period. The slower upside pace this time around helped the market break lower into the last half hour of the day. It was enough of a retracement from highs that the S&P 500 and Dow Jones Ind. Ave. both closed in the lower half of their daily range.

Heading into Tuesday we have a number of economic reports coming out at 8:30 and 10:00 ET, including the fourth-quarter gross domestic product data. This could affect morning trading. Ideally, in order to see a strong setup on the 60 minute charts, the market will pull back gradually or continue to base for about a day to a day and a half. This would create a buy setup on an upside breakout if volume remains light. The market pulled up quickly enough that a break in the 100 day sma in the NASDAQ would first require that pace to turn back over unless it was going to break as just a trap for the bears.

Economic Reports and Events
Feb. 28: Chain Deflator-Prel. for Q4 (8:30), GDP-Prel. for Q4 (8:30 am), Chicago PMI for Feb (10:00 am), Consumer Confidence for Feb (10:00 am), Existing Home Sales for Jan (10:00 am)
Mar 01: Personal Income for Jan (8:30 am), Personal Spending for Jan (8:30 am), Construction Spending for Jan (10:00 am), ISM Index for Feb (10:00 am), Crude Inventories 02/24, Auto Sales for Feb (12:00 am), Truck Sales for Feb (12:00 am)
Mar 02: Initial Claims 02/25 (8:30 am)
Mar 03: Mich. Sentiment-Rev. for Feb (9:50 am), ISM Services for Feb (10:00 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
Feb 28: AGIX (B), ADSK (A), BJ (?), CDIS (A), CNP (B), CRDN (B), CHTR (B), CCI (A), BOOM (?), EV (?), HLTH (A), HNZ (?), HSP (B), IIP (?), IVGN (?), PSUN (A), PRX (B), PSS (B), PGH (?), PLUG (B), SWN (A), SPLS (B), TEVA (B), THE (B), VPHM (B), VNO (B), WMB (B)
Mar 01: ADCT (A), AEOS (B), AZO (B), CHS (A), CTB (B), CVTX (A), FLR (A), FL (?), THX (B), HOV (A), JOYG (B), LIZ (B), MDR (A), MHS (B), MW (4:00 pm ET), NVAX (?), OVTI (?), OS (?), PLL (A), PETM (A), REV (?), RDC (?), SKS (08:00 am ET), SPW (B), TLM (?), TS (?), WLT (?), WNR (A)
Mar 02: TFSM (B), CKP (B), CIEN (?), COST (B), CMOS (A), DT (02:00 am ET), FNSR (A), HOMS (A), INSM (A), KOPN (?), NTMD (B), NOVL (A), OPSW (A), PBY (A), SFCC (A), SCON (B), THC (B), PGR (?), UVN (A)
Mar 03: BVN (?)
Mar 06: ABP (B), CMGI (A), RIO (A), GG (B), KFX (A), LEXR (A), MYOG (A), SMTC (A)
Mar 07: ABS (?), SIL (?), MATK (A), NR /?), NRG (?), OSIP (A), PSTI (B), SRZ (?), COO (A), KR (?), URI (B)
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.