Good day! I hope you had a wonderful Cinco de Mayo. The morning began with the trend channel from the prior day holding into the open. We were starting to see the upside really slow down, however, as the market struggled to make higher highs after hitting equal move resistance on the 60 minute charts following Tuesday afternoon's post-Fed. breakout. This is a pretty decent price resistance level for a breakout pattern. It occurs when the breakout move is comparable to the move heading into the base and works best if the moves take place at approximately the same speed.

Due The strong extension on the 60 minute charts made me very hesitant to be long intraday. We saw a triangle forming at highs for the first 2 hours of the day. Typically it was one that would break higher since the downside pace was more gradual and volume was declining nicely, but the exhausted uptrend intraday didn't even allow for the trend channel to break higher and it would have been a lot higher risk even if it had. Instead the 5 minute 20 sma support gave way after a 3rd upside move out of a Cup with Handle the triangle hit price resistance at prior highs.

After breaking 5 minute 20 sma support, the pace in the market turned over. The indices had pulled back rather quickly from highs and then started to creep higher, hugging the 5 minute 20 sma. As a result, I began to watch for an Avalanche breakdown on the 5 minute charts. It tried to break a bit early but then continued into a retest of highs on the SP500 and Dow before confirming its bearish status at the same time as news hit regarding GM and Ford Motor Co., giving them junk status. The market was already looking lower before the news, but this served as a strong catalyst to kick it off and sustain the move for three waves of selling on the 2 minute charts going into the 13:00 ET reversal period. That hit at the same time as the 5 minute 200 sma .

The NASDAQ formed a type of double bottom know as a 2B on the 5 minute charts at support. This occurs when the market makes only slightly lower lows at a strong support level and helps kick off a correction try flushing out weak hands and trapping late shorts. It created a pivot into the 5 minute 20 sma resistance where the market fell into a triangle before breaking lower. The 15 minute charts were looking pretty weak by this point so I was hoping to see a stronger late day breakdown. The pace wasn't stronger on the downside yet though and the primary risk for shorters was that the market would fall into a longer range and correction to the support, which ended up taking place out of the 15:00 ET reversal period when the market pivoted coming out of the slow 5 minute decline and moved higher into the close.

PENN held up very well on Thursday and look still higher on the daily charts. Stops can be under the 20 day sma support. AAP and ASKJ (position trades) are also looking well and have no updates. Both have room for a bit of a correction on the daily charts. ADSK remains of interest on the daily and weekly charts in about a week or so for an upside breakout.

On Friday we have the employment data coming out prior to the open. This will provide some guidance to the market going into the day after a slow, choppy week of trading. Even though the 15-60 minute charts were looking pretty weak going into the close on Thursday, I'm going to wait and watch for the reaction to the morning numbers since we might try to get a stronger test of the daily moving averages overhead and last month's breakdown zone before we see some stronger selling again.

Economic Reports and Events
May 06: Average Workweek for Apr (8:30 am), Hourly earnings for Apr (8:30 am), Nonfarm Payrolls for Apr (8:30 am), Unemployment Rate for Apr (8:30 am), Consumer Credit for Mar (3:00 pm)
May 09: Wholesale Inventories for Mar (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 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
May 06: ASTM (?), NOV (B), OATS (B)
May 09: AL (?), CRAY (?), DCEL (A), DYN (B), FSH (A), FTI (A), GNTA (?), IIP (?), MEDX (?), PCLN (A), PVX (B), SONS (?), TSO (?)
May 10: ANR (B), ASYT (A), CE (?), CQB (B), CSCO (A), EAGL (B), KFX (?), MDG (A), MSSN (B), MYGN (B), NPSP (?), NTLI (02:00 am ET), SRP (B), MAY (?)

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.