Good morning! Tuesday was a pretty quiet day in the market. It started with a small gap lower into the open following Monday afternoon's weak close. The open was still right into price support from Monday, however, making for a lot of indecision since the market really wanted to correct from the upside of the prior week, but became extended to the downside intraday with the open.

The first pattern I began to look for was a base along lows that allowed for the formation of a 15-30 minute Avalanche pattern. In order for this bear setup to develop, we needed to see volume decline as the market hugged the support level. A slower upside pace within the base would also be needed in order to get a strong selloff. The SP500 and Dow Jones did this fairly well with the first two criteria, but the NASDAQ held up much better, breaking above the 50% retracement barrier on the 15 minute charts. All three indices had trouble bringing in strong selling within the range as compared to the buying.

The range on the day going into noon was the most choppy we have seen in many weeks. It was also very narrow. Even pivot trades off support and resistance levels were more difficult simply because the range didn't allow for a lot of movement. I was hoping to see the range break lower by at least the 14:00 ET reversal zone when the FOMC Minutes were released. Due to the large reaction to the wording coming out of the last FOMC Minutes release, the market seemed to want to wait until 14:00 ET before it broke. Volume was extremely light and few traders seemed willing to press their luck. Unfortunately, even after the release, the market was unable to pick up speed. The SP500 and NASDAQ both formed small triangle patterns on the 2-5 minute charts going into 14:30 ET, but we never saw a larger confirmation on the 30 minute breakdown attempt and prior lows held as the market ran to create new highs into the close.

Since the market based for longer than usual for a continuation short pattern yesterday, but at the same time, was unable to pick up speed on the upside, I remain more cautious going into Wednesday. I will continue to trade with smaller lots and tighter setup parameters for now.

AAP from the $51.88 zone on the 25th is correcting a bit on the daily after two strong weeks. Highs of $59.85. Trailing stop initiated for position trades. May 18th earnings. ASKJ on the weekly charts has also broken higher. From last week, BBI is no longer of interest. VAR and ALGN from 5/11 have tight trailing stops initiated. VAR triggered a breakout just under $34, it has highs of $38.20. ADTN highs are $22.70 from the $21 zone. LCAV triggered a continuation on Friday over $41.50, higher than the prior day due to the gap. It hit highs of $45.35. Some trailing stops hit.

Economic Reports and Events
May 25: Durable Orders for Apr (8:30 am), New Home Sales for Apr (10:00 am)
May 26: Chain Deflator-Prel. for Q1 (8:30 am), GDP-Prel for Q1 (8:30 am), Initial Claims 05/21 (8:30 am), Help-Wanted Index for Apr (10:00 am)
May 27: Personal Income for Apr (8:30 am), Personal Spending for Apr (8:30 am), Mich. Sentiment-Rev. for May (9:45 am)
May 30: -
May 31: Chicago PMI for May (10:00 am), Consumer Confidence for May (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 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 25: AZO (B), DLTR (B), KMG (?), MIK (A), ¸NOVL (?), PETC (?), WIND (A)
May 26: CHS (A), CA (?), COST (B), CMOS (12:00 pm ET), DG (B), FRED (B), HNZ (07:00 am ET), PDCO (B), TECD (?), TIVO (A), TOL (?)
May 27: -
May 30: -
May 31: FRO (?), HOV (A), SMTC (A)

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.