Good day! After selling off on Tuesday, the market made a strong recovery into Wednesday's Fed day. The morning was fairly typical, with upside to start out. A large chunk of this came in the premarket, resulting in a strong upside gap to take the indices into Tuesday's highs. This continued shortly thereafter coming out of the 9:15 ET reversal period and then picking up steam with the 10:15 ET reversal period. From that point onward the volume in the market dissipated as the indices fell into a trading range ahead of the 14:15 ET Fed announcement.

The market did manage a couple of light volume moves in the early afternoon. First they broke slightly lower around 12:45 ET. The pace was gradual and the indices then put in a minor rally from 13:30-14:00 ET. The morning highs held as resistance just prior to the announcement. As anticipated, the Fed held the overnight lending rate unchanged at 5.25%. It was suggested that this would remain the case for the time being since inflationary pressures appear to be under control.

The reaction to the Fed was very muted as compared to many Fed days. The initial response was a move lower. The selling was choppy, continuing for over half an hour until hitting support from morning lows and the S&P 500's 5 minute 200 simple moving average support. The secondary reaction on the 5 minute charts was a bit more decisive, taking back most of the losses in about 15 minutes with the 15:00 ET reversal period. The third and final move was a congestion one, with the indices basing for the last hour of the day. They attempted to form a 5 minute cup with handle, but lacked any upside follow through before the closing bell.

The end result on the day was that the indices were relatively unchanged after the initial morning trading. They managed to hold onto most of the morning gains. The Dow Jones Industrial Average ($INDU) rose 72.28 points (+0.6%), the S&P 500 ($SPX) gained 6.87 points (+0.5%), and the Nasdaq Composite added 39.52 points (+1.4%). The top sectors included computer software (aided by strong earnings data from ORCL), networkers, computer hardware, and brokers. Energy and oil services continued to underperform. The oil services index alone fell 3.4% as crude-oil prices took a dive. Crude-oil prices have fallen more than 20% in the past two months.

My bias on Thursday is in favor of the bulls. The market held up extremely well on Wednesday and held the 10 day sma as support. The volume has picked up a bit since last month, and this will help the bulls. The prior highs from earlier in the year in the Dow and S&Ps remain a concern, however, since a double top or 2T (with a slightly higher high that causes a trap and reversal) can easily form. This is because of the extent of the pullback from May through July that retraced more than 50% of the prior rally. The current action, however, suggests that the trading range from January through April in that index will likely be a stronger resistance level for the overall market.

Economic Reports and Events
Sept. 21: Leading Indicators for Aug. (10:00 am), Philadelphia Fed for Sep. (12:00 pm)
Sept. 22: -
Sept. 25: Existing Home Sales for Aug. (10:00 am)
Sept. 26: Consumer Confidence for Sep. (10:00 am)
Sept. 27: Durable Orders for Aug. (8:30 am), New Home Sales for Aug. (10:00 am), Crude Inventories 9/22 (10:30 am)
Sept. 28: Chain Deflator-Final. Q2 and GDP-Final. Q2 (8:30 am), Initial Claims 9/23 (8:30 am), Aug. Help-Wanted Index (10:00 am)
Sept. 29: Personal Income and Personal Spending for Aug. (8:30 am), Sept. Michigan Sentiment-Rev. (9:50 am), Sept. Chicago PMI (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 stock's earnings date before holding a position overnight.
Sept. 21: COMS, COGN, CAG, FDX, GIS, NKE, PALM, RAD, SCHL
Sept. 22: -
Sept. 25: JLG, WAG
Sept. 26: DBRN, FUL, JBL, LEN, PAYX, RHAT, WOR
Sept. 27: MKC
Sept. 28: ACN, FDO, RIMM, TXI, TIBX
Sept. 29: GPN
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.