Good morning! I hope you had a great weekend. Friday's market was quite interesting. We saw a great deal of divergence between the NASDAQ Composite on one hand and the SP500 and Dow Jones Ind. Ave. on the other. The day began with a slight upside gap, strongest in the NASDAQ. Shortly after the open the market began to pull back. The SP500 and Dow both broke Thursday lows but the NASDAQ didn't even manage to close the gap.

The pullback off opening highs was pretty rapid, more than you will usually see just before a new highs is made. This made for a bit higher risk setup into 10:00 ET. The NASDAQ broke highs on the pivot, but the SP500 stalled at the 5 minute 20 sma, creating another pullback intraday from highs. The NASDAQ had a nice Bull Flag, but the weaker SP500 still had a bit stronger of a pullback than usual for a flag, even though it broke higher when the NASDAQ did. As the NASDAQ continued to make new intraday highs, the SP500 still had to contend with opening prices. This stalled the market and from that point on new attempts at highs had a more difficult time. In my opinion, this made for a more difficult morning with higher than average risk.

With choppy trading and more gradual highs, risk began to increase even more going into noon. As the highs began to round off, however, we started to see reversal patterns begin to take shape. The initial pivot came off a 2 minute Head & Shoulders in the SP500 and a 2T coming out of a pennant in the NASDAQ just before 12:30 ET. This served to turn over the pace in favor of a stronger downside move. It made it likely that an Avalanche would follow. As volume dropped and the market based into the 5 minute 20 sma, it created a near-perfect short pattern on the 5 minute charts going into 13:15 ET.

The follow through coming out of the Avalanche was a bit slower than the initial move off highs, but was still stronger than average, creating a decent chance that the move would be followed by a Bear Flag and continued selling into the afternoon. The fact that volume didn't pick up much at all on these first two waves of selling on the 5 minute charts also suggested further downside. As you can see, however, timing was a bit more difficult because we didn't see very solid 5 minute Bear Flags form. Instead the market crept lower into 14:30 ET when we finally saw the volume spike on the 15 minute charts which indicated exhaustion. This was followed by a small 2B reversal on the 2 minute charts off the support, leading to a correction off lows into the close.

On Monday I am expecting that we see a bit more of a correction to Friday's afternoon selling. This could be through a range or a bit more of a move higher. The volume was pretty strong on Friday, which make me a bit wary of shorting, but we don't have strong intraday buy patterns, just the extended move to the downside intraday to suggest the need for a longer rest. The market had put in an equal move on the down side as compared to the prior drop in the SP500 and Dow, so a correction off the support is often comparable to the prior correction off selling as well.

AAP from the $51.88 zone on the 25th is correcting a bit on the daily after two strong weeks. Highs of $55.44. Trailing stop hit for swingtrades. 50 day sma is support for position trade. May 18th earnings. ASKJ long remains of interest. From last week, BBI long is also still of interest. VAR, ALGN and ADTN long all have broken out. VAR and ADTN as short term trades have hit trailing stops and have 20 day sma support for longer term. ALGN has yet to really pick up pace.  UNP and CCU short have both hit new lows. Trailing stops initiated.

Economic Reports and Events
May 16: NY Empire State Index for May (8:30 am)
May 17: Building Permits for Apr (8:30 am), Core PPI for Apr (8:30 am), Housing Starts for Apr (8:30 am), PPI for Apr (8:30 am), Capacity Utilization for Apr (9:15 am), Industrial Production for Apr (9:15 am)
May 18:  Core CPI for Apr (8:30 am), CPI for Apr (8:30 am)
May 19: Initial Claims 05/14 (8:30 am), Leading Indicators for Apr (10:00 am), Philadelphia Fed for May (12:00 pm)
May 20: -
May 23: -
May 24: FOMC Minutes (2:00 pm)

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 16: A (A), BGO (A), CNR (?), GG (B), LTD (?), LOW (B), SNDA (A)
May 17: ANF (A), AMAT (4:30 pm ET), BKS (B), BJ (B), BGP (A), DE (B), HPQ (?), HD (B), JCP (?), JWN (A), PNRA (A), SKS (B), SPLS (B)
May 18: AAP (A), BEAS (?), POS (B), FL (A), HOTT (4:00 pm ET), INTU (A), PETM (?), PLAB (?), ROST (08:00 am ET), CRM (A), SNPS (A), TLB (?)
May 19: ARO (A), ALKS (A), ANN (B), ADSK (A), BPUR (B), BRCD (A), CBRL (B), CHRS (A), CHINA (B), CLE (06:00 am ET), GPS (A), SYNC (A), MRVL (A), OPSW (A), PSS (?), SRNA (A), PLCE (B)
May 23: CPB (?)
May 24: CSC (A), GME (B), NTAP (A), SEAC (A), VOD (?), WSM (?)

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.