Good day! Thursday morning began with a continuation of the prior two days of trading. Despite a slight downside gap into the open, the market quickly regained its footing and began to climb. The latest state unemployment benefits data came out at 8:30 am ET, showing a 6-month high for those collecting benefits, although first-time filings were lower last week. At 10:00 am ET the upside increased when the Conference Board announced that the composite index of leading economic indicators declined in July by 0.1%. This helped raise confidence further than the Fed would continue to hold back on further rate hikes for the time being.

After popping on the 10:00 data, the market began to correct on the 5 minute charts, pulling into the 20 period simple moving average on declining volume. This created a continuation pattern for steady buying throughout the remainder of the morning. A second intraday correction to the trend began just prior to noon, pulling the market back once more into the 5 minute 20 sma with the 12:00 ET reversal period. This time the pace on the selling was a bit stronger, indicating that the market was beginning to run out of steam after two and a half days of steady upside. The Philly Fed index also came out at this time, showing strong factory growth by rising from 6.0 in July to 18.5 in August, the strongest level in 16 months.

A third continuation move managed to bring the indices to new highs into the 13:00 ET reversal period, but the market then began to round off at high, showing the lightest volume on the upside as compared to the prior buying. This volume decline suggested a hesitancy on the part of many market participants in terms of their expectations for the afternoon. The market had now reached that point where a larger correction became imminent.

I cannot recall a time that the market was able to manage an upside move for more than three days without breaking the 15 minute 20 sma support and the norm is closer to 2.5-2.75. Thursday was no exception. Once the selling hit at about 13:30 ET, it remained steady over the course of the following hour. While difficult to see on a 5 minute chart, the decline came in three waves with only a very slight correction between each. The market finally found support near the day's opening prices at about 14:30 ET. From there it pivoted strongly into the 5 minute 20 sma resistance and then chopped around again for the last hour of the day.

The Dow Jones Ind. Average closed higher by 7.84 points (+0.1%) at 11,334.94. The S&P 500 rose 2.05 points (+0.2%), ending at 1,297.48. The strongest index was again the Nasdaq Composite. It gained 8.07 points (+0.4%), finishing the day at 2,157.61. Leading sectors included internet and software stocks, networkers and biotechs. Oil services and energy stocks continued to underperform.

Despite the uptrend channel break on Thursday afternoon, I am not that bearish heading into Friday. Instead I am leaning more towards a lot of back and forth action throughout the session as a means of continuing to correct from the week's buying thus far and we have room for another attempt higher into the afternoon. I will be waiting to see how the intraday momentum play out going into the afternoon. Slower downside action would be preferable for the bulls.

Economic Reports and Events
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. 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.