Good day! Wednesday was quite a roller coaster ride in the market. The support from the prior day's lows held very well going into the day and the market experienced a dramatic upside gap into the open. Gaps of that magnitude in the overall market will typically fail to hold up unless they are breakaway gaps from a trend. That was not the case since the gap was simply into the upper end of the trading range of the last week or so. Initially the market did begin to full the gap with the Dow Jones Industrial Average showing the most relative weakness. This is a strong break from the trend that has been in place throughout most of the year where the Dow has shown the best relative strength in the market and the Nasdaq Composite has been the weakest.

The selling out of the gate continued until the indices ran into their 5 minute 20 sma support zones. The pace into that support was choppy, but steady. Overall it was also more gradual than average and this helped the market bounce for the latter half of the morning, creating more strength than is typical given the gap. The buying was steady and took the Nasdaq and S&P 500 to new highs on the day. The Dow remained much weaker. The indices finally stalled their rally when the S&P hit the prior day's highs. It was a difficult pivot to time, however, since it came at neither significant resistance in all three indices nor at a reversal period, so the reversal from the highs going into the early afternoon took a little bit longer to gain momentum. The indices first fell into 5 minute 20 sma support where they based to form a continuation short. It was that breakdown, shortly after 12:30 ET, that brought back the bears in full force.

The market continued to sell off until it put in three waves of downside on the 5 minute charts. It then took a breather into 14:30 ET, basing along the lows and forming a larger bear flag into the 5 minute 20 sma resistance. This breakdown was a lot more steady than the initial trend off highs and did not contain the smaller bear flags on the 5 minute charts that were present in the move from 11:45 to 13:30 ET. The downside did manage to slow a little into the last 30 minutes of the day once the indices had established an equal move on the 15 minute charts as compared to the initial downside, but it still closed near the lows of the day.

The overall follow through on the market was very reflective of the weakness we were looking at heading into the session. This is a result of the inability of the market to sustain an upswing from one day into the next without a strong reversal intraday. I think that things are slightly oversold intraday at this point due to the nose dive into the close, but am still more bearish for the remainder of the week even though we still have stronger odds for the continuation of the intraday swings from highs to lows.

Economic Reports and Events
Aug. 10: Initial Claims 8/5 (8:30 am), Trade Balance for June (8:30 am), Treasury Budget for July (2:00 pm)
Aug. 11: Export Prices ex-ag, Import Prices ex-oil, Retail Sales, Retail Sales ex-auto for July (8:30 am), Business Inventories for June (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.
Aug. 10: AAP, AIRN, ADI, BVF, BGG, EAT, CREE, DISH, ELX, EXPE, FMD, GG, ING, JCP, KSS, MOVI, NXG, NVDA, PSUN, TGT, TOMO, UBB, URBN
Aug. 11: CCUR, ERJ, IAG, PBR
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.