Good morning! The sellers returned with a vengeance on Wednesday following several days of choppy range-bound correction to last week's rapid descent. The Dow Jones Industrial Average was so hard hit that it saw its largest one day decline in more than three years while the Nasdaq Composite gave back the rest of its first quarter gains, turning negative on the year. The resumption of the selloff was instigated by the 8:30 am ET CPI data indicating increased inflation and fear that the Fed will once again raise rates with its next session, something most market participants were not wishing for. The consumer-price index rose 0.6%, while the core CPI rose 0.3%. Both were greater than expected.

There were very few bastions of strength during Wednesday's session. Brokers saw a 2.9% decline, internet stocks fell 2.4%, energy stocks lost 2.5%, home builders fell 2.3%, oil services 2.1%, pharmaceuticals 2.0% and utilities dropped 1.8%. Not even precious metals were able to withstand the pressure. Perhaps on the plus side was that crude-oil hit its lowest level in over a month due to a continued rise in gasoline supplies.

The only Dow component to end the day higher was HPQ, up 3.4% to $32.16, after reporting a strong profit increase and beating analysts' earnings expectations. The gain was established within the first 15 minute of the day and on the morning gap, however, leaving nothing for daytraders hoping to cash in on that tiny glimmer of strength. Several of the biotech stocks had strong action as well with nicer intraday movement, particularly GENZ, which had a trend day to close at $58.06 (a 6% gain) after announcing two new tests to monitor a form of acute leukemia. A couple of other popular companies that managed to swim against the current were BRCM ($37.46, +$1.08), CELL ($22.34, +$4.61), MCRS ($39.73, +$1.78), SNIC ($16.86, +$0.97), THC ($8.03, +$0.62), and KKD ($11.35, +$0.92).

Following the premarket CPI data, the market gapped down a decent amount into the open. Typically extreme gaps in the indices themselves will attempt to fill within the first two hours of the day and most often in the first hour, leading to some initial upside out of the open. Without much support on the larger time frames, the market had a more difficult time with this on Wednesday. The indices did manage to more higher for the first half hour of the day, coming close to filling the morning gap in the S&P 500 and Nasdaq, but the Dow had another agenda and simply fell into a range at opening levels.

Once the all sessions 5 minute 20 sma resistance hit on the S&P 500 and Nasdaq, as well as price resistance from the prior day's lows, the market again gave way to selling. The Dow got off to the best start since the pace on the rally in the S&P and Nasdaq led them into a longer range on the 5 minute charts. They also broke significantly lower, however, coming out of the 1:00 ET reversal period. The selloff was steep and the indices easily put in an equal move decline as compared to the selloff from the prior afternoon's highs before they found support around 11:30 ET.

Volume spiked on the 15 minute charts as the indices became exhausted over noon. A couple of days ago I mentioned that the Dow would have the most room to move on selloffs as a result of the slower reversal off last week's highs, while the Nasdaq would have a more difficult time due to its earlier selloffs. We saw this very clearly on Wednesday. While the S&P and Nasdaq fell into a trading range going into the latter half of the afternoon, the Dow continued to creep lower. The S&P 500 broke to new intraday lows coming out of the 14:00 ET reversal period, but the Nasdaq, while holding 15 minute 20 sma resistance, was unable to mount a move to new intraday lows.

The market still looked very weak heading into the close on Wednesday, but it has been moving slowly higher in afterhours trading. Twenty-week simple moving average support on the Dow and 20-month sma support on the Nasdaq are continuing to hold, but I fear that we are likely to see these support levels break before summer is over given how rapid the decline into them has been. With very few buy patterns even forming on the daily and weekly charts, and many weekly charts showing plenty of room to move lower, it will be a tougher environment for those unaccustomed to shorting or unable to do so due to account restrictions. Nevertheless, once this initial panic clears, we will begin to see more news events able to create upside momentum in individual stocks.

As earnings season winds down, Advance Auto Parts (AAP), Barnes & Noble (BKS), and Sears Holdings (SHLD) are scheduled to report before the bell on Thursday. Reporting after the close are Dell (DELL), Aeropostale (ARO), Autodesk (ADSK), Cost Plus (CPWM), Nordstrom (JWN) and Marvell Technology Group (MRVL). This week of key economic data will finally wrap up as well. Initial claims are due at 8:30 am ET, followed by April's leading indicators report at 10:00 am ET. Finally, the Philadelphia Fed Index comes out at noon ET with the latest read on regional manufacturing. I would not recommend holding most daytrades into the 12:00 Philly Fed because swift market moves following it can easily shake traders out of open positions.

Economic Reports and Events
May 18: Initial Claims 5/13 (8:30 am), Leading Indicators for April (10:00 am), Philadelphia Fed for May (12:00 pm)
May 19: -
May 22: -
May 23: -
May 24: Durable Orders for April (8:30 am), New Home Sales for April (10:00 am), Crude Inventories 5/19 (10:30 am)
May 25: Chain Deflator-Prel. for Q1 (8:30 am), GDP-Prel. for Q1 (8:30 am), Initial Claims 5/20 (8:30 am), Existing Home Sales for April (10:00 am), Help-Wanted Index for April (10:00 am)
May 26: Personal Income and Personal Spending for April (8:30 am), Michigan Sentiment-Rev. for May (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
May 18: AAP (B), ARO (A), ALKS (?), ADSK (A), BKS (B), BRCD (B), CTRN (A), CPWM (A), CLE (B), DELL (A), FMCN (A), GPS (?), LTD (?), MRVL (A), NWY (B), JWN (?), SHLD (B), STP (B), PLCE (?)
May 19: ASEI (B), ANN (B)
May 22: CPB (?), FLO (?), LOW (?), TECD (?), PAY (?), WTSLA (A)
May 23: CSC (A), LNUX (A), MDT (A), PVH (A), TOL (?), ZL (A)
May 24: AZO (B), CWTR (A), DLTR (B), JLG (A), MIK (?), NTAP (A), PSS (B), SPI (?), TIVO (A), WSM (B)
May 25: BLI (?), CHS (A), CMOS (?), JOYG (B), PDCO (B), PDC (B), PLMD (B), SAFM (B)
May 26: CBRL (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.