Good day! Volume in the market increase on Thursday as the indices continued to correct from off Tuesday's highs. On the Big Board, 1.47 billion changed hands with 1.86 on the Nasdaq. Much of the weakness took place out of the open with a gap down, followed by a brief period of congestion, and then further selling into the 10:15 ET reversal period in the Nasdaq and the 10:45 ET reversal period in the S&P 500 and Dow Jones Industrial Average. This trend was simply an extension of the move from the prior afternoon and it held that trend channel until the mid-morning reversal periods.

After showing the greatest relative weakness the day before, the Nasdaq had the easiest time reversing intraday on Thursday off the morning lows. While the S&Ps and Dow were making new intraday lows at 10:45 ET, the Nasdaq was moving along its 5 minute 20 sma resistance. It was able to quickly return to opening highs out of 11:00 ET, while the other two indices still had to contend with that 5 minute 20 simple moving average resistance. The Nasdaq continued to trend higher throughout the remainder of the morning, but the other two fell into 5 minute continuation patterns into noon before finally breaking higher.

The 12:00 ET zone is a very common time for the intraday trend in the market to begin another reversal or correction. We saw this on Wednesday as the indices bounced off intraday lows at that time, but on Thursday the market followed action more along the line of Tuesday's reversal from highs. Like Tuesday, the market held up pretty well following the 12:00 ET reversal period. The S&Ps and Dow in particular did well hugging the 15 minute 20 sma resistance as volume declined. This created a buy setup out of the 13:00 ET reversal period. Unlike on Tuesday, however, this time around the buying was a bit stronger. The rally accomplished a close of the morning gap in the S&Ps and Dow and took the Nasdaq back into the congestion zone of the prior day, as well as its 15 minute 200 sma resistance.

For the remainder of the day, the market again returned to its early morning roots. While not as rapid as the 5 minute surges higher that preceded it, the overall pace of the selling as compared to the move off early morning lows was still very strong. In fact, it took about 3 hours to complete the move from lows to highs in the Dow and S&P 500, but then only half that amount of time to return to those lows.

The intraday downtrend that took place during the last two hours of the day was steadier than the prior uptrend. There were only small continuation patterns on 1 and 2 minute charts, as opposed to the 5 minute buy patterns that took place into noon and the early afternoon. This created potential for greater difficulty to capitalize on the move for some traders. Despite the strong resistance to indicate a pivot, it gave fewer chances for a solid entry and stop once the selling was under way. That also meant a lot more overlap from bar to bar on the downtrend, so nervous hands could more easily get flushed out with that type of action. It is situation such as this, it is very important to not get too wrapped up in Level II activity that can go back and forth a great deal while still holding a larger trend.

I am leaning towards the market trying to hold Thursday's range on Friday. I think the larger back and forth moves with the strong upside into the early afternoon on Thursday will make it more difficult for the indices to adequately break those lows. They might have a slightly lower low, like the Dow experienced on the 5 minute charts at 10:45 ET intraday. If it does not do that, then the action will be more bearish into next week. If it does make a slightly lower low it can create some traps and take a bit longer to continue lower and can more quickly fall into a larger retracement off lows, such as the indices experienced on Thursday. Nevertheless, the end result on Thursday was still not very fruitful for the bulls, despite this mid-day rally. The Dow ($INDU) lost 74.76 points, the S&P 500 ($SPX) lost 6.24 points, and the Nasdaq ($COMPX) fell 12.55 points.

Note: The current futures contract is December (Z). For continuity, I have continued to use September's contract (U) for the images here since the activity is nearly identical at this point.

Economic Reports and Events
Sept. 8: Consumer Credit for July (3:00 pm)
Sept. 11: -
Sept. 12: Trade Balance for July (8:30 am)
Sept. 13: Crude Inventories 9/8 (10:30 am), Treasury Budget for Aug. (2:00 pm)
Sept. 14: Business Inventories for July (8:30 am), Export Prices ex-ag. and Import Prices ex-oil for Aug. (8:30 am), Initial Claims 9/9 (8:30 am), Retail Sales for Aug. (8:30 am)
Sept. 15: Core CPI and CPI for Aug. (8:30 am), NY Empire State Index for Sep. (8:30 am), Capacity Utilization and Industrial Production for Aug. (9:15 am), Mich. Sentiment-Prel. for Sep. (9:50 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.
Sept. 8: -
Sept. 11: CPB
Sept. 12: BBY, ENER, GS, PLL, KR
Sept. 13: LEH, XLNX
Sept. 14: ADBE, BSC, PIR, TEK
Sept. 15: -
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.