Good day! On Friday we saw the first strong trend day that has occurred in many weeks. I didn't have a strong bias going into the day because I've been looking for a larger correction for early a week but have seen mainly a trading range for the correction as opposed to a pullback. The NASDAQ defied it completely by climbing even higher, although the pace has been a lot slower aside from Wednesday's morning rally. I think this rally on the morning's ISM Index number just served to flush out some of those who had started to turn bearish after the prior morning's sharp drop.

Even though the slow rally didn't break on Thursday to trigger a 30 minute Avalanche like I was looking for that day, the slower upside pace going into Friday allowed for one on the 60 minute charts in the Dow Jones Ind. Ave. The SP500 and NASDAQ had moved a lot higher though and both came into prior highs going into the day. The resistance was enough to create a double top and selling going into the last trading day of the week began right out of the open. Initially it tried to hold the support from the lower trend channel on the 5 minute, but the closure of the gap in the Dow and the prior day's highs on the SP served as resistance. When selling came in at 10:00 out of the ISM Services release, it rapidly picked up pace. This led to a sharp plunge into the prior day's lows.

It is typical that prior lows on 15 minute charts and higher will stall a move the first time they are retested and Friday morning's descent was no exception. The correction from that level was gradual and volume declined going into mid-day. When the 5 minute 20 sma resistance level hit, selling came back in. It was slow at first, but formed a 2 minute continuation pattern into 11:30 ET when selling came in much more rapidly, leading to an equal move drop on the 5 minute NASDAQ and completing an equal move on the 15-30 minute charts as compared to Thursday afternoon's selloff.

Over noon the market based once again. Volume also declined, showing a lack of interest from the bulls. This created another Bear Flag formation, but the NASDAQ had already had three waves of selling on the all sessions charts (which include premarket trading in the futures). The intraday charts were also pretty extended and many were coming into the 10 day sma support. As a result, a 5 minute Bear Flag never managed to get going off the 20 sma this time when it hit just before 13:30 ET. Instead it continued onto the 15 minute one, Due to it being a Friday, a lot of the traders wanting out before the weekend probably already were by the time the 14:00 ET reversal period hit, so the attempt to break even lower failed to generate a great deal of selling interest.

Going into Monday, the weakest pattern seems to be forming in the SP500. It is rounding off the most on the daily and 60 minute charts and can drop pretty quickly once this base on the 60 minute charts goes. The 20 day sma is the next main support zone on that time frame with the 60 minute 200 intraday in the Dow and the 30 minute 200 sma in the SP500. Even though the market looks pretty extended, overall their is a lot of support under these highs that can make for a continuation of the more choppy action we've seen in recent weeks.

Despite market weakness, most of my longs still performed well with many at new highs. AAP from the $51.88 zone on the 4/25 is correcting a bit on the daily after two strong weeks. Highs of $61.50. Trailing stop initiated for position trades. ASKJ has highs of $31.75 from 5/18'a breakout. Tight trailing stop initiated. LCAV triggered a continuation on Friday over $41.50, higher than the prior day due to the gap. It hit highs of $6.05. This also should have tight trailing stops. CI triggered on 5/26 with the break of $97.55 and hit highs of $99.10. It held the 20 day sma on Wednesday and trailing stops can be under those lows. UNH, RT and GR triggered on Wednesday. UNH from the $49.40 zone has highs of $51.33. with some trailing stops hit. RT and GR have yet to pick up strength but are still outperforming the market. On the short side, WEN has hit trailing stops from Tuesday's short. WLP and OVTI triggered on Friday and look nice going into the new week. IGT and EL are still of interest.

Economic Reports and Events
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)
Jun 08: Wholesale Inventories for Apr (10:00 am)
Jun 09: Initial Claims 06/04 (8:30 am)
Jun 10: Export Prices ex-ag. For may (8:30 am), Import Prices ex-oil for May (8:30 am), Trade Balance for Apr (8:30 am), Treasury Budget for May (2:00 pm)
Jun 13: -
Jun 14: Core PPI for May (8:30 am), PPI for May (8:30 am), Retail Sales for May (8:30 am), Retail Sales ex-auto for May (8:30 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
Jun 03: SFD (?)
Jun 06: CMGI (A), ZQK (?)
Jun 07: ABS (?), COO (A), TOY (?)
Jun 08: CMTL (B), HRB (4:00 pm ET)
Jun 09: FNSR (A), NSM (?), NAV (B), TOY (?)
Jun 10: -
Jun 13: -
Jun 14: BBY (?), BMC (?), PIR (?)

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.