Good day! I hope you had a wonderful weekend! It looks as though hurricane season is officially upon us. As we were heading back from the International Traders Expo in Fort Lauderdale this weekend we ran into some of the first feeder bands from Tropical Storm Alberto. On the plus side, it should help squelch some of the fires we witnessed crossing Alligator Ally earlier. On the minus side, let's hope it doesn't lead to much flooding!

The bad weather hit the market a little bit earlier in the year. After turning sharply off May 10th highs, the major indices continued to descend in last week's trading. I had been expecting the lows to hold a little longer off the initial test of support at the end of last month, but the upside pace within the reaction was unable to overtake that of the sellers. The slower rallies within the congestion led to another breakdown late last week, bringing both the S&P 500 and Dow Jones Industrial Averages into their 20 week simple moving average zones.

The market put in a strong intraday pivot on high volume on Thursday morning, exhausting the intraday and daily selloff. The reaction was strong enough off lows that the indices rallied throughout the remainder of the session, closing near the highs of the day. Without much for corrective action within the upside move during the afternoon, the market had a hard time continuing higher on Friday morning. It attempted it for just over an hour, but by the time the 10:45 ET reversal period hit, the upside pace had slowed as compared to the prior moves.

The momentum continued to decline as the morning progressed, leading to a 2T reversal pattern into 10:45 ET on the Nasdaq Composite and Dow Jones Industrial Average and a pennant reversal on the S&P 500. A strong downside move into the 5 minute 200 sma support led to greater favor among the bears once more. A more gradual rally following the rounded highs helped form a head and shoulders pattern on the 5 minute charts that was followed by another wave of selling on that time frame. It lasted into the 12:00 ET reversal period and took the indices into their 15 minute 20 sma support. A third and final wave of selling finally brought the market back to the prior morning's support level and a pivot off intraday lows going into 13:30 ET.

Given that the corrections at 11:00 and 12:00 lasted for comparable amounts of time, the market broke the downside intraday after the third move lower. The 5 minute 20 sma served as some initial resistance, but a bit of pressure eventually took the market back to the middle of the day's range where the Nasdaq and Dow's 5 minute 200 sma helped apply some pressure on the bulls before the close. While not obvious on the 5 minute charts shown here due to futures expiration, volume was lighter throughout the afternoon and traders remained wary holding onto any bullish sentiments into the weekend. Selling resumed with the 15:00 ET reversal period and the market closed near intraday lows. The Dow Jones Ind. Ave. lost 46.9 points on Friday, the S&P 500 fell 5.63 points, and the Nasdaq Composite ended lower by 10.26 points.

The fact that the market broke down last week earlier than an ideal continuation, and that volume spiked on Thursday coming out of that selloff, suggests that the market is rather oversold heading into Monday. I didn't get much of a chance to really scan over the weekend, but I am expecting the indices to continue to round off at lows and show some greater corrective action off the weekly support over the next several days. A slightly lower low would be ideal for the bulls to help flush out a few more of them before attempting a bounce. There is a lot of activity again in terms of the economic reports, more speeches from Bernanke and second quarter earnings from Lehman, Goldman Sachs and Bear Stearns due out this week. While these alone can create more of an indecisive market such as occurred into the end of last month, since the market had a strong downside move last week, the upcoming action this week should be even more choppy than it would be based on these other events alone.

Economic Reports and Events
June 12: Treasury Budget for May (2:00 PM)
June 13: Business Inventories for April (8:30 AM); Core PPI, PPI, Retail Sales, and Retail Sales ex-auto for May (8:30 AM)
June 14: Core CPI and CPI for May (8:30 AM), Crude Inventories 6/10 (10:30 AM), Fed's Beige Book (2:00 PM)
June 15: 6/10 Initial Claims and NY Empire State Index for June (8:30 AM), Net Foreign Purchases for April (9:00 AM), Capacity Utilization and Industrial Production for May (9:15 AM), June Philadelphia Fed (12:00 PM)
June 16: Q1 Current Account (8:30 AM), Michigan Sentiment-Prel. for June (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
June 12: LEH (B)
June 13: BBY (B), GS (B)
June 14: CPST (?)
June 15: BSC (B), KBH (A), MBT (?), OVTI (?), PIR (B), PGR (?)
June 16: WGO (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.