Good morning! The market took a dive on Friday after strong employment data fueled concerns over more interest rate hikes to come. As the bond market pushed yields to multiyear highs, the bulls in the equity market stuck their tails between their legs and ran for cover. The Dow Jones Industrial Average ($INDU) closed down 96.46 points at 11,120.04, while the S&P 500 ($SPX) lost 13.54 points to end at 1,295.50. Even the Nasdaq Composite fell, losing 22.15 points and finishing flat on the week at 2,339.02.

The selling hit with the 9:45 ET reversal period after gapping up slightly and holding there for the first 15 minutes of the day. Three waves of selling followed on the 1-5 minute charts, stalling first at 5 minute 20 sma support before continuing. It put in an equal move on that time frame after the support broke just 15 minutes later, then rested another 15 minutes before completed a third move.

It is normal that the market will create a longer correction after the third drop before it can resume. When the correction is 1.5-2 times the two that took place in the three wave decline, it will tend to be the last one of the trend before the market stops putting in lower lows on that time frame and either reverses or corrects through a much more substantial sideways trend.

This meant that the fourth wave coming off the 5 minute 20 sma around 11:30 ET was followed by a great deal more corrective action off late morning support going into the afternoon. Granted, it was primarily through time versus price, but downtrend channel broke on the 5 minute charts and the market fell into a range until the last hour of the day. After hitting the 15 minute 20 sma, the market did try to break again, but the Nasdaq held morning lows.

It is likely that we will continue to see more weakness into the early part of the week. The drop was made easier by the lack of a strong upside pace with the range of the prior couple of weeks and that pace was the main concern we examined when the market attempted to break higher. There simply was not enough conviction to drive up the volume and increase momentum. Each new attempt at highs had been beaten down quickly on the 15 minute charts either that afternoon or the following morning, making sustained gains intraday very difficult.

That pace issue is going to remain a concern for bulls this week as well. I found very little on the daily charts for swingtrade setups either way this week and I have fairly even lists for buying versus shorting as longer term positions, meaning that there just is not a strong bias in the market overall at this time and risk will continue to remain higher, much as it has throughout most of the year. This does not mean there are not opportunities, only that I am seeing higher failure rates and fewer "textbook" setups in recent weeks on the larger time frames. With earnings season kicking off it is now also very important to watch out for holding into those announcements on shorter term trades. It should mean an increase in intraday setups, however, and bring about more daily activity as well.

Economic Reports and Events
Apr 10: -
Apr 11: -
Apr 12: Trade Balance for Feb. (8:30 am), Crude Inventories 04/07 (10:30 am), Treasury Budget for Mar (14:00 pm)
Apr 13: Business Inventories for Feb. (8:30 am), Export prices ex-ag for Mar (8:30 am), Import Prices ex-oil for Mar (8:30 am), Initial Claims 04/08, Retail Sales for Mar (8:30 am), Retail Sales ex-auto for Mar (8:30 am), Mich. Sentiment-Prel. for Apr (9:50 am)
Apr 14: Capacity Utilization for Mar (9:15 am), Industrial Production for Mar (9:15 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
Apr. 10: AA (?), SCHN (B)
Apr 11: DNA (A), LPL (?), MOS (?)
Apr 12: CBH (B), GCI (B), GTK (B), HDI (B), LRCX (A), SOSA (A)
Apr 13: MTG (B), NYT (?), TRB (B), VCP (?)
Apr 14: -
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.