Good day! The new week kicked off with a continuation of the choppy, thinner trading that we experienced throughout the past several trading days. The selling that had been picking up pace into Friday's close managed to follow through very well into Monday, but it didn't last very long. The indices quickly made their way into support from the lows of last week's trading range. The Dow Jones Ind. Ave. soon emerged as the market leader, holding lows right away out of the open while the S&P 500 and Nasdaq Composite both continued to sell off for a stronger test of support.

The S&Ps and Nasdaq located a couple of forms of support within the first 30 minutes of trading. They included the 30 minute 20 simple moving average and the price support from last Wednesday and Thursday. Although this pushed them both into larger corrections off the support zone, they took awhile to round off at the support and lacked the strong intraday trend of the Dow that had taken it back into the resistance zone from last week's highs by noon. It took three waves of buying on the 5-15 minute charts to do so, but the S&P and Nasdaq both joined the boat for the Dow's final morning rally beginning at 11:15 ET.

From noon until 13:30 ET, the volume in the market declined to levels comparable to those seen on Friday at about the same time. The market pulled back quickly into 5 minute 20 sma support, but took a little while to change pace completely. They began to hug the lows made at that support and then rapidly gave way to strong selling. Unless you caught this breakdown right away or jumped on the momentum, however, it didn't offer anything for continuation patterns.

When this is the first wave of selling on a breakdown it then becomes very difficult for the market to continue at such a pace. Support hit on the selloff at the same time as the 14:00 ET reversal period and it held well. I was looking for a bearish close but primarily choppy trading. The market actually held up a little better than I expected since only the S&P 500 continued the selling into 15:00 ET. At that point it hit support at the 15 minute 200 sma and held that level for the remainder of the session.

I am continuing to focus more on the downside as the week progresses. The change of pace on Monday afternoon was a great lead for further selling. The day ended on Monday with a loss of 8.72 points in the Dow, closing at 11,670.35. The S&P 500 fell 4.53 points to 1,331,32. The Nasdaq Composite experienced the most significant percentage loss (-0.9%) and gave up 20.83 points, closing at 2,237.60. The 20 day simple moving average is going to serve as some initial support in the indices because it has held this rally over the last couple of months. Once that gives way then the congestion from late August and the 50 day sma will be the next major daily support zone.

Economic Reports and Events
Oct. 3: Auto and Truck Sales for Sept. (12:00 am)
Oct. 4: Factory Orders for Aug. and ISM Services for Sept. (10:00 am), Crude Inventories 9/29 (10:30 am)
Oct. 5: Initial Claims 9/30
Oct. 6: Average Workweek, Hourly Earnings, Nonfarm Payrolls and Unemployment Rate for Sept. (8:30 am), Consumer Credit (3:00 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.
Oct. 3: LWSN, PBG, MOS
Oct. 4: ARRO, CPRT, GY, BLUD, RPM, VTS, WWW
Oct. 5: STZ, MAR, MU, SLR
Oct. 6: -
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.