Good morning! Although the rather significant divergence between the NASDAQ on one end and the SP500 and Dow Jones Ind. Ave. on the other remained present in Wednesday's session, the strong buying from the prior afternoon persisted going into the open. The day began with a gap up into the open, followed by a brief correction for the first 15 minutes of the day. The Dow held up the best during this time, basing at highs, while the NASDAQ pulled in enough to close the gap. The 9:45 ET reversal period held well, however, and the Dow was soon making new highs while the NASDAQ tested them again at 10:15 ET.

At 10:30 ET the market broke the early morning congestion and hit new intraday highs. This took the NASDAQ and SP500 into that 100 day sma resistance that we were looking at as the next significant resistance level going into the day. This made for a logical resistance level for a mid-day correction. It did not last quite as long as expected though. Instead of correcting on the 15-30 minute charts, the indices only corrected on the 5-15 minute charts, barely even showing up on the 15 minute NASDAQ. All three indices had fallen into a range at the daily moving average resistance. Volume dropped off and the 5 minute 20 sma served as support. The NASDAQ started to break higher shortly after 11:00 ET, but the pace didn't pick up until the 12:00 ET reversal period when the Dow and SP500 also broke their range at highs.

The early afternoon rally stalled as it put in an equal move on the 5 minute charts as compared to the initial rally following the open. At that point the buying slowed and the SP500 and Dow began to round off at highs as the Dow came into its own 100 day moving average resistance. The NASDAQ applied its relative strength to put in a small continuation pattern on the 2 minute charts. As the 13:00 ET reversal period hit though, all three indices began to correct from their pivot highs, pulling in more quickly than the last segments of their rallies until they hit their 5 minute 20 sma support. At that point they formed small Avalanche setups to pull back into the 14:00 ET reversal period. This held and led to a retest of the morning highs at a much more gradual pace before the market pulled back again into the close. From the point of the 13:00 ET reversal, however, the subsequent action was really just a trading range on the 5 and 15 minute charts.

Going into Thursday I am expecting that we see a bit more correction off Wednesday highs, but the indices really don't feel too overbought yet. The upside pace has picked up, which tends to mean that while we are hitting equal move resistance as compared to the rally into the beginning of May, we can get a bit more of an equal move since the move is much stronger than the prior one. You will want to start to use a bit more caution on new swingtrade longs, however, since most are already on their way and need corrections on at least the 15-30 minute charts before they can offer low risk continuations.

LCAV and DF are of interest for upside continuations. AAP from the $51.88 zone on the 25th is correcting a bit on the daily after two strong weeks. Highs of $55.54. 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 remains range bound. It needs to hold Monday's lows.

Economic Reports and Events
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 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.