Good day! Following Thursday's strong Fed-fueled momentum move to the upside, the market formed a typical correction day on Friday. The day began with a decent upside gap, continuing the rally from the prior afternoon, but the pullback from these highs began early on. Intraday highs were made in the first fifteen minutes of the day and the indices pulled in steadily for the first hour. There was a brief stall in the selling once the gap closed, but it continued out of the 9:45 ET reversal period. This selling slowed again into 10:00 ET, however, the market didn't begin to correct off support until 10:30 ET when the pace of the selling turned over on the 1-2 minute charts and once again began to favor stronger upside on the smaller time frames.

As anticipated, Friday was more of a day for intraday pivots on the 2-5 minute charts, as opposed to a favorable environment for strong trend moves. Volume was light due to the end of the week and the upcoming Fourth of July holiday trading. An early close on Monday and a day off on Tuesday led many market participants to take off early for their weekend vacations. It's also more difficult for strong late day trend moves, such as occurred on Thursday, to sustain themselves well into the next trading day even without a holiday, and this also helped the market hold the opening highs.

The pace within the day's trading range began to slow on the selling heading into the early afternoon. A strong, albeit brief, upside move into 11:00 ET was followed by a much more gradual pullback into 12:30. This action was repeated (to a lesser degree), creating a more bullish pace and bias into 14:00 ET. The S&P 500 and Dow Jones Ind. Ave. were both able to move higher into the 9:45 ET congestion zone, taking the Nasdaq with them, but they were unable to attract enough buyers to sustain a strong rally. They once again turned over as the 15:00 ET reversal period hit. The selling that followed took all three indices back into the day's lows. By the end of the session the Dow ($INDU) had lost 40.58 points, the S&P 500 ($SPX) fell 2.67 points, and the Nasdaq Comp. ($COMPX) gave up 2.29 points.

I am expecting Monday to be another slow day for the market due to the early close, followed by no trading on Tuesday. The market bias this week is a continuation of the correction off the 20 month simple moving average in the S&P 500 and Dow Jones Ind. Ave., both of which hit several weeks ago. These isn't a lot of fuel for Monday, however, and in the long run we would need to see a better change of pace on the weekly charts to sustain a major rally. This looks pretty unlikely at this point and the odds are higher that any new test of the year's highs would merely serve to trap more bulls before the market puts in a longer correction on the monthly time frame.
 
Economic Reports and Events
July 3: Construction Spending for May (10:00 am), ISM Index for June (10:00 am)
July 5: Auto and Truck Sales for June (12:00 am), Factory Orders for May (10:00 am), Crude Inventories 6/30 (10:30 am)
July 6: Initial Claims 7/01 (8:30 am), ISM Services for June (10:00 am)
July 7: Average Workweek, Hourly Earnings, Nonfarm Payrolls and Unemployment Rate for June (8:30 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
July 03: -
July 04: -
July 05: -
July 06: LI (A), TIBX (A)
July 07: -
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.