Good day! Despite a lot of hype and speculation over the weekend suggesting otherwise, the market has held up extremely well over the past two days. The 20 day sma that has been sustaining the uptrend in the Nasdaq again held. The Nasdaq Composite is trying to make a break for the congestion zone at previous monthly highs that we looked at a few days ago as a stronger resistance level in that index. As mentioned at that time, in the QQQQ this corresponds to the $42.00 price zone.

The market had a strong boost from the 10:00 ET Institute for Supply Management. Up until that point, the market was moving lower, following through on the prior day's afternoon correction. The ISM nonmanufacturing index fell to 52.9% off the previous level of 57% in August. This was a lot more than anticipated, but it continued to show slow expansion. Within the report was the most significant accelerant for the market: the price index. This is used to discern inflation and it fell to 56.7% off August's 72.4% level.

Following the initial morning surge, which took the indices into resistance from the price levels of earlier this week, the market fell into a trading range. This began at 10:30 ET and continued into 11:15 ET. At that point the Dow Jones Industrial Average and S&P 500 found support at their 5 minute 20 sma and the range broke higher. This was faster than usual for a correction off an extreme upside move such as out of 10:00 ET and it make it more difficult for the indices to show the same type of momentum on it. On a trend day, however, the market corrections within a trend are often less consistent and show more variation in the times they take to correct. A failure to turn over and pull back more strongly over noon, instead correcting gradually on light volume, led the way to a continuation and confirmation of a trend day out of the 13:30 ET reversal period.

The market continued to perform well throughout the remainder of the day, with small corrections on the 5 minute charts on lighter volume, followed by increases in volume on the breakouts. The 15:00 ET reversal period tried to put the indices into a longer corrective phase, but the pace was unable to turn over and the 5 minute 20 sma held well. By the end of the session the indices were again hitting new highs.

There is still a little room on the Nasdaq before that larger weekly resistance hits. I think we will see this hold up into it, but I am still leery on new longer term positions on the upside at this point. The extension on most of the stronger bullish stocks is extreme to a level that it would not take much to kick off a multi-month pullback and will tend to significantly diminish the risk:reward ratios on pattern setups. Intraday on Thursday the market can try to hold up initially, but a stronger open will lead to an easier pullback later on in the day. The choppy continuation into Wednesday's close can also help with a larger intraday correction, especially if the market gaps higher into the open.

Economic Reports and Events
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. 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.