Good morning! Despite having found a good deal of buy setups going into the shortened trading week, the market finally broke lower on Tuesday, ruining a number of the upside prospects that had been basing at highs. Our caution on the long side was a good thing since it kept me from being too aggressive into the morning, although I still made the mistake of trying to buy a pivot off the 5 minute 200 sma in the Dow Jones Ind. Ave. (YM) with the 9:45 ET reversal period after the first wave of selling. Despite being support, we never saw any volume at that level and it gave way just prior to 10:00 ET, taking the stronger NASDAQ into its own 5 minute 200 sma support while the Dow hit its 15 minute 200 sma at about the same time.

The NASDAQ actually bounced pretty well from support, making it all the way back to morning highs before the 10:45 ET reversal period where it hit that price resistance at the same time as the SP500 and Dow hit their 5 minute 20 and 200 sma resistance. This time the NASDAQ, which tried so desperately to hold up throughout the morning up to that point, gave way with absolute abandon, selling off sharply into 11:00 and the onset of the mid-day doldrums. You can see this time that volume spiked on this index and the zone of morning lows in the SP500 and Dow served as support to stall the move and lead to a correction off them going into lunch.

The volume in the indices remained very light going into the early afternoon, which was on par with the latter half of last week. This, combined with the sharp morning selloff, made for a very gradual move higher into the afternoon. There was a great deal of overlap and not really much for clear-cut buy patterns except a slight bull flag in the NASDAQ into 13:30 ET. This took the market into price and moving average resistance at the 14:00 ET reversal period, but the trend channel support and 5 minute 20 sma held on the correction and soon the NASDAQ was once again back to morning highs by the 15:30 ET reversal period. By barely breaking the prior highs, it created a 2T reversal in the SP500 and Dow and the selling picked up once more for the remaining 30 minutes of the day.

Going into Wednesday it is looking as though we are going to see some continued selling since volume was pretty light with the move off highs so far. Typically it will pick up as it exhausts itself. The downside pace is also much stronger than the upside and that would need to turn over in order to bring in some decent buying. Despite this change in market direction, I am still finding more solid buy setups than sell setups on the daily charts. A lot of this, however, is simply because the market has been so strong in recent weeks and hence reversal patterns are more likely to be found intraday in stocks that have actually performed pretty well lately as opposed to a lot of bear flags in larger downtrends.

AAP from the $51.88 zone on the 4/25 is correcting a bit on the daily after two strong weeks. Highs of $59.88. Trailing stop initiated for position trades. ASKJ on the weekly charts has also broken higher into $30.86 from 5/18. VAR from 5/11 has a tight trailing stops initiated. VAR triggered a breakout just under $34, it has highs of $38.46. 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 triggered on 5/26 with the break of $97.55 and hit highs of $99.10. It had a tough time Tuesday afternoon and needs to hold the 20 day sma zone. SBC from Tuesday's watch list can be removed due to breaking the other way out of the base. UNH, RT and GR are still of interest. Heading the other way, WEN formed a 2T on the daily charts and broke lower, although the pace thus far has been slow.

Economic Reports and Events
Jun 01: Construction Spending for Apr (10:00 am), ISM Index for May (10:00 am), Auto Sales for May (12:00 am), Truck Sales for May (12:00 am)
Jun 02: Initial Claims 05/28 (8:30 am), Productivity-Rev. for Q1 (8:30 am), Factory Orders for Apr (10:00 am)
Jun 03: Average Workweek for May (8:30 am), Hourly Earnings for May (8:30 am), Nonfarm Payrolls for May (8:30 am), Unemployment Rate for May (8:30 am), ISM Services for May (10:00 am)
Jun 06: -
Jun 07: Consumer Credit for Apr (3:00 pm)

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
Jun 01: CMVT (A), JOYG (B), MBT (07:00 am ET), PLL (A)
Jun 02: CIEN (B), TTWO (A)
Jun 03: SFD (?)
Jun 06: CMGI (A), ZQK (?)
Jun 07: ABS (?), COO (A), TOY (?)

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.