Good day! The indices experienced a strong degree of divergence on Monday as we head into earnings season. Although the Nasdaq Composite, S&P 500 and Dow Jones Ind. Ave. all gapped higher into the open, the Nasdaq expressed the least enthusiasm. The S&Ps and Dow continued their ascent for the first 90 minutes of the day until hitting price resistance from Friday's Dow highs at the 11:00 ET reversal period. While they were making a series of higher highs, however, creating an uptrend on the 5 minute charts, the Nasdaq was doing the opposite. It turned over at 10:15 ET and began a downtrend on the 5 minute charts.

With so much overhead resistance I was on the side of the bears, looking for the S&Ps and Dow to turn around with the Nasdaq. This picked up once the 5 minute 20 sma gave way in those two indices. There was not extreme selling, however, and volume remained rather light for most of the day as the market crept lower with a series of lower lows and lower highs for bear flag and continuation breakdowns. I actually found this a more difficult market to daytrade, but the swingtrade setups that triggered performed marvelously as a whole... even the buy setups (entire list: FPL, SPN, LRY, PNM, UTIW, and PEG long; FDO, AET, PLXS, WLSC, FBN, KLAC and FAF short).

Although the market trended lower throughout the afternoon, the Nasdaq was a bit more steady, while the S&P and Dow picked up the pace as their morning gaps finally filled heading into the 15:00 ET reversal period. This served as a very strong support level and marked the end of three choppy waves of selling on the 5 and 10 minute charts that began at 11:00 ET. The reversal period held very well and the market popped somewhat into the last hours of the day. Prior 5 minute highs stalled the ascent, but it was still enough to help the Dow maintain at least a small part of its early morning gain.

Technology stocks helped hold down the Nasdaq throughout the day, but the semiconductors were particularly relentless. Networkers fell 2.4%, while computer-hardware stocks lost 2.5%. The top gainers were airlines, oil services, and utilities. By the end of the day the Dow ($INDU) held onto 12.88 points, while the S&P 500 ($SPX) gained 1.86 points. The Nasdaq Comp. ($COMPX) fell 13.13 points.

I continue to have a strongly mixed list of both longs and shorts heading into Tuesday. At this point I wish to keep things rather diversified since each sector is moving a lot more independently at this point and showing opportunities in both directions on many daily charts. Intraday, however, we are more likely to pull higher in the indices going into the morning as the market continues its move off the 15:00 ET exhaustion move into larger intraday and daily support.

Economic Reports and Events
July 10: Wholesale Inventories for May (10:00 am), Consumer Credit for May (3:00 pm)
July 11: -
July 12: Trade Balance for May (8:30 am), Crude Inventories 7/7 (10:30 am)
July 13: Initial Claimes 7/8 (8:30 am), Treasury Budget for June (2:00 pm)
July 14: Business Inventories for May (8:30 am), Export Prices ex-ag for June (8:30 am), Import Prices ex-oil for June (8:30 am), Retail Sales for June (8:30 am), Michigan Sentiment - prel. for July (9:50 am), Business Inventories for May (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
July 10: AA (?),SCHN (B), SGR (?)
July 11: AMB (A), DNA (A), LPL (3:30 am ET), PBG (B), RI (A)
July 12: AIR (B), FLS (?), GCI (B), INFY (?), PKX (A), RECN (A), TKLC (?)
July 13: CTAS (A), FLE (B), MAR (B), NXY (?), PEP (B), TXI (?), TRB (B), VCP (B)
July 14: FNFG (B), GE (?), RF (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.