Good day! After a strong upward surge on Wednesday, the market corrected throughout most of the day on Thursday. As expected, we saw the gains hold on pretty well despite the corrective action. The indices still had room to move heading into the day, but the morning began slowly. This prevented an upward flush that would have more easily led into a stronger retracement and instead allowed the indices to continue to creep higher, but at a much slower pace, punctuated by a number of larger 5-15 minute pullbacks.

The first pullback of the day came after a choppy, but bullish, open. Early morning economic data showed a drop in initial claims for state unemployment insurance by 17,000 to 302,000 for the week ending Sept. 30. After turning over at 10:00 ET, the market pulled back into congestion from the prior afternoon and then rounded off at the support. The Nasdaq found the strongest momentum, but it only lasted a few minutes. These brief moves one way and then the next rapidly became the norm for the session. There were a couple of pattern trades within the indices, but it was a difficult day overall because the back and forth action created a lot of flush moves on individual stocks and left fewer low risk setups on the 5-15 minute charts.

Heading into the afternoon the bias began to turn more favorably towards the bulls following 13:00 ET, but the chop continued and made strong follow through exceptionally difficult. The "flush" type of action continued when the market pulled sharply lower for a few minutes into the 14:00 ET reversal period, only to slowly turn back around shortly thereafter. The reversal low did manage to hold, however, for the remainder of the session, leading to new highs.

Following an increase in upside momentum such as this week, corrections on the daily and larger intraday time frames will typically take a lot longer to get started. In order for any strong pullbacks to take place there are usually rounded highs or such that will allow the momentum to turn over. This might mean a form of double top with a slower move into the second high as compared to the first. It might mean a Head and Shoulders pattern. It could also come in the form of an ascending pennant that makes smaller and smaller new highs with greater difference between lows. If this doesn't occur, then the market would try to correct via a trading range instead. Continue to look out for the congestion earlier in the year at highs as the main resistance on the Nasdaq, which would then be likely to stall the S&P 500 and Dow Jones Ind. Ave. when it hits.

Economic Reports and Events
Oct. 6: Average Workweek, Hourly Earnings, Nonfarm Payrolls and Unemployment Rate for Sept. (8:30 am), Consumer Credit (3:00 am)
Oct. 9:  Wholesale Inventories for Aug. (10:00 am), Treasury Budget for Sep. (2:00 pm)
Oct. 10:  Crude Inventories 10/06 (10:30 am), FOMC Minutes Sep. 20 (2:00 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 stock's earnings date before holding a position overnight.
Oct. 6: -
Oct. 9: EMMS
Oct. 10: AA, CHTT, CMGI, DNA, LPL, SVU
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.