Good day! The market saw the second trend day in a row following the early morning consumer price data. The core CPI, which excludes food and energy costs, rose by a 0.2%, less than the 0.3% anticipated. This was viewed as very good news for the market, which has been hoping that a slowdown in the economy will mean an end to the Fed rate hikes which had occurred steadily over the last two years up until the last meeting.

The consumer data created another upside gap as proposed in yesterday's column. Additionally, the strength continued to build most strongly in the Nasdaq as anticipated due to a better change in pace on the daily charts and less upside resistance. The stronger rally off lows into early August in the Dow Jones Ind. Ave. and S&P 500 also left those two indices more extended than the Nasdaq, which saw less initial strength off recent monthly lows.

Although volume remained moderate, the market saw steady buying throughout the session. As with the recent upside gaps over the last week, the market saw congestion out of the open with a very gradual pullback into the 5 minute 20 sma support. This kicked off a rally, much as it did in the prior three cases, but the buying was more subdued. This choppier, yet steady, buying became the norm for the day. A second continuation took place out of 11:30 am ET and once again led to new highs into the early afternoon.

A third correction on the day took place between 12:45ish and 13:30 ET. The indices broke the 5 minute 20 sma support slightly, but without any volume or increase in momentum and quickly found support from congestion earlier in the day before breaking higher. The breakout picked up strength after 14:30 ET, but was similar to the buying Wednesday afternoon. Even though the trend channel held steady, there was a lot of overlap in price from bar to bar on 5 and 15 minute charts. As with the prior day, there was also a very slight correction just before the close. Nevertheless, the market still managed to close right off the highs of the day. In the Dow, this was right in the area of the prior daily highs, the strong resistance zone we were looking at heading into the session.

The number on the day came out with a 96.86 point gain in the Dow Jones Ind. Ave., closing at 11,327.12, a 9.85 point gain in the S&P 500 to 1,295.43, and a 34.53 point gain on the Nasdaq Composite, which ended the session at 2,149.54. The technology sector saw some of the greatest strength. The semiconductor index alone rallied 4.3%. The oil and energy sectors continued to have a rough time.

The steady nature of the market's rally over the last couple of days is one that can turn over quickly when it occurs in smaller segments intraday, but laced together with the gaps they have shown a strong change in the overall market and continue to suggest strength into Thursday. Since we have had two days of upside without a correction significant enough to break the 15 minute 20 sma however, it's important to keep in mind that such moves will almost never continue for more than three days without that larger break. The norm is 2.5-3 days and then a break of the 15 minute 20 sma. Sometimes it will just fall into a longer trading channel and then continue instead of reversing, but the need for a larger rest will still remain either way.

Economic Reports and Events
Aug. 17: Initial Claims 8/12 (8:30 am), Leading Indicators for July (10:00 am), Philadelphia Fed for Aug. (12:00 pm)
Aug. 18: Michigan Sentiment - Prel. for Aug. (9:50 am)
Aug. 21: -
Aug. 22: -
Aug. 23: Existing Home Sales for July (10:00 am), Crude Inventories 8/18 (10:00 am)
Aug. 24: Durable Orders for July (8:30 am), Initial Claims 8/19 (8:30 am), New Home Sales for July (10:00 am)
Aug. 25: -

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. 17: ARO, ADSK, BKS, BEBE, BRCD, CHL, CLE, CPWM, DELL, GME, GPS, HIBB, LTD, MRVL, NWY, JWN, SHLD, PLCE
Aug. 18: ANN, FL
Aug. 21: LOW
Aug. 22: BGP, INTU, MDT, TOL
Aug. 23: BHP, CHS, CWTR, DLTR, EV, MIK, PSS, PTR, PVH, TECD
Aug. 24: PDCO, WSM
Aug. 25: -
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.