Good morning! Despite three consecutive days of upside to wind down last week's trading, the light volume during the buying and weakening pace into Friday afternoon were two contributing factors to the breakdown that took place Monday. The weakness was a bit more than I was expecting heading into the day. It will make the triangle scenario we looked at yesterday more difficult now unless the market pushes past last week's lows over the next couple of days and then bounces again. This is a distinct possibility. The next support is not until the Dow Jones Ind. Ave.'s 200 day sma, shown in pink on the daily chart of the DIA.

After a slightly larger than average gap on Monday morning, taking the market back into price support from the prior afternoon, the selling continued. Lighter than expected sales forcasts for May by Wal-Mart, indicating economic pressures on the more frugal or lower-income consumers, did not help matters. Once the intraday selling was under way, it continued unabated until price support from Thursday afternoon and 15 minute 200 sma support in the Dow. This hit as the 10:00 ET consumer confidence data was released, showing a decline from the prior month's highs. It was not as large of a drop as anticipated, but after hitting nearly 4-year highs in April (109.8), the index still slipped back to its lowest level since October of last year. So, while the 103.2 level still beat 100.7 expectations, all it managed to do was assist the support levels in stalling the market's hasty retreat off last week's highs.

After basing into the 5 minute 20 sma resistance, selling resumed out of the 11:00 ET reversal period. The pace was not as strong as earlier in the day, but all three indices made new intraday lows. The declining pace on this move actually helped kick off a greater level of congestion on the 15 minute charts. While the market continued to inch lower even into the early afternoon after another base over noon, the overall picture was more of a trading channel and sideways correction. This becomes more apparent when examining volume and the fact that volume remained lighter into the afternoon. It wasn't until the 15 minute 20 sma resistance finally hit around 14:30 ET that the bears really showed their heads again in force.

The market broke down out of a third and final trading channel on the 5 minute charts going into the 15:00 ET reversal period. Once again the pace on the selling increased, as did the volume, leading to a solid downward move into the close. By the time it was all said and done, the S&P 500 had lost 29.32 points, falling to 1, 259.87. The Dow Jones Ind. Average shed 182.18 points, closing at 11,094.43. The Nasdaq Composite dropped 45.63 points. It ended the day at 2,164.74. Some of the biggest losers came in the semiconductors, internet stocks and home builders. All three sectors lost more than 2% on Monday alone. Retailers also had a rough time, falling 1.8% on the day.

The remainder of the week is a busy one on the economic front. In the morning comes the Chicago purchasing managers' index for May (10:00am). This will be followed later in the day by the minutes from the May 10th FOMC meeting (2:00pm). Thursday is the busiest day of the week and includes the revised first-quarter nonfarm productivity figures (8:30am), April construction spending (10:00am), and ISM manufacturing index for May (10:00am). Also on Thursday, retailers and auto manufacturers will be announcing May sales results (throughout the day). Friday, however, will be the most important day of the week with the employment data coming out in the premarket (8:30am). Also out on Friday is the data for April factory orders (10:00am).

Economic Reports and Events
May 31: Chicago PMI for May (10:00 am), Crude Inventories 5/26 (10:30 am), FOMC Minutes for May 10 (2:00 pm)
June 1: Auto Sales for May (12:00 am), Truck Sales for May (12:00 am), Initial Claims 5/27 (8:30 am), Productivity-Rev for Q1 (8:30 am), Construction Spending for April (10:00 am), ISM Index for May (10:00 am)
June 2: Average Workweek, Hourly Earnings, Nonfarm Payrolls, Unemployment Rate for May (8:30 am), Factory Orders for April (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
May 31: ADCT (A), COST (B), DBRN (A), HOV (A), NOVL (A), SIGM (?), TIF (B)
June 1: CIEN (?), DG (B), HNZ (B), PLL (A), PMTK (?), NX (?), WIND (A)
June 2: -
June 5: CMGI (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.