Good morning! The market gapped down once again on Wednesday. This time, however, the gap held. The day began right into support from the prior day's intraday lows. This created some choppiness out of the open as the market corrected to the support zone by falling into a range. This was most noticeable in the NASDAQ. As the 10:15 ET reversal period hit, the support gave way and triggered a continuation to the premarket selling. This triggered the larger 15 minute breakdown as well that had tried to get started the prior afternoon.

The breakdown followed through smoothly into the 10:45 ET reversal period. At that point the market again found support at prior lows intraday from a few days back as well as equal move support on the 15 minute SP500 as compared to the drop into the prior morning. Things rounded off going into noon, forming a 2B in the Dow Jones Ind. Ave. by only barely breaking the prior lows and then creating a larger range on the 15 minute charts once again.

The 15 minute Bear Flag broke rather early, coming out of the 13:00 ET reversal period and well before the 15 minute 20 sma resistance hit. This added some risk and although the market put in a strong initial move, the support from 13:30 ET led to a stronger bounce than would have been ideal for a Bear Flag. The prior 5 minute highs stalled the bounce, but 14:30 ET saw another spike that took the SP500 all the way back to morning highs and price resistance. We were seeing more divergence between the indices at that time with the SP500 having a strong go at it than the weaker NASDAQ. By hitting the larger time frame resistance from morning highs though, the SP500 couldn't move past 14:30. The NASDAQ had more leeway since it got off to a slower start and was able to climb into the close when it finally came into morning highs as well.

Even though the market correction on the daily charts picked up steam to a degree Wednesday morning and into the early afternoon, the action has still been more difficult for larger intraday and daily pattern traders. To add to the slower pace of the pullback, the market keep experiencing brief bursts of momentum, flushing out shorts and sparking a bit of excitement by the bullish latecomers. The correction looks to continue as the week progresses, and while the risk for a continuation of the rapid spikes in the interim remains, it should be a lesser concern since they have already provided a few flushes for the market.

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. VAR from 5/11 has a 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. Trailing stops hit. 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. CI is of interest as a new swingtrade on an upside breakout on the daily charts.

Economic Reports and Events
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 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.