Good day! The market had another choppy session on Wednesday, but the T/A followed through very well with a little patience. As you may recall, I was looking for an upside breakout into the morning as a result of Tuesday's very narrow range day after Monday's late day rally. This began with a gap up into the open yesterday and that took a bit of the potential out of the move as a trade, but still left a bit of room to move before it caught up to resistance. The action was very choppy, however, and while we saw an initial 5 minute bull flag on the all sessions charts, the indices quickly fell into a range, only breaking after a 10:30 ET pullback to the 5 minute 20 sma support.

The market slowly made its way higher over noon, but around 11:30 ET we started to see the pace turn over. While we did see better trending action, the day was more of an upside down "V" than a trend day, in larger part due to the overhead daily resistance we were looking at going into the session. The NASDAQ weakened a lot with a small 2T double top on the 2 minute charts followed by a quicker pullback to the 5 minute 20 sma. This meant that even though the Dow was holding up very well, it was still at the highs of the recent daily range and would have a more difficult time continuing the move if the NASDAQ didn't turn around.

As you can see, the pace within the mid-day range never did come around to favoring the bulls again. The Dow Jones Ind. Ave. hugged its 5 minute 230 sma into 13:30 ET, making it very likely to break lower and the NASDAQ had continued to pull into its 15 minute 20 sma support. As such, I was already more bearish in the late morning, but became even more so when the market showed no reaction off the 5 minute 20 sma support.

The lack of mid-day upside also meant that not only would the bears be more prominent, but they would be more aggressive. As a result, early on the in the afternoon I was looking for even the stronger Dow Jones Ind. Ave. to make it all the way back to its lows on the day. This gave even those who missed the initial turn around a chance to follow some of the bear flag action on the 5 minute charts going into the close, beginning with the 13:30 one in the NASDAQ and continuing out of 14:30 in all three indices as they bounced off the 5 minute 20 sma resistance.

One of the clues to help identify this late day potential was the fact that over noon all the selling we saw, while fairly strong in the NASDAQ, didn't bring in any volume, showing that there was not enough panic or turnover to exhaust the market on the downside. We did see a bit of a pick up with the 5 minute exhaustion move into the 14:00 ET reversal period, but it wasn't stronger than most 15 minute moves and the trend placement wasn't developed enough to flush enough people out either.

MRK did very well Wednesday morning, making new highs which allows for stops to be moved to about the breakeven zone under the 20 day sma and whole number support of $32. Highs were $33.43. In the market we are seeing a bit of rounding off at lows in the Dow and SP500. This is more bullish than the NASDAQ which is holding a daily bear flag formation much better. We need to see the pace turn over on the SP500 and Dow to allow for a decent drop in the market as a whole. This can still take another 3-5 days. Currently market risk still remains higher because of the added back and forth action of this daily range. As such, continue to use greater caution and do not be too aggressive, particularly on swingtrades.

Economic Reports and Events
Apr 07: Initial Claims 04/02 (8:30 am), wholesale Inventories for Feb. (10:00 am), Consumer Credit for Feb. (3:00 pm)
Apr 08: -
Apr 11: -
Apr 12: Trade Balance for Feb. (8:30 am), FOMC Minutes (2:00 pm), Treasury Budget for Mar (2:00 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
Apr 07: CAN (?), STZ (A), PIR (?), RAD (?), RPM (B)
Apr 08: -
Apr 11: DNA (A)
Apr 12: ABT (B), AMTD (B), GCI (?), SOSA (07:00 am ET)

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.