Good day! Heading into the new week we were looking forward to seeing some more upside on this most recent daily breakout. It materialized early on with a continuation of the prior afternoon on a rally into the 10:15 ET reversal period. At that point the S&P 500 found resistance from Friday's highs and the market began to retrace the move. The pace on this pullback was fairly decent and took back about 50% of the gains. This tends to push a stock or index into a trading range when it occurs and the same applied on Monday as well.

The indices found support at the next reversal period of 10:45 ET. The volume began to slow and trading became choppy except in the Dow. We again began to see a great deal of divergence between the indices. The Nasdaq Composite started to base along the 15 minute 20 sma support, while the Dow and S&Ps held up near highs. The downside pace in the Nasdaq, however, remained slower than the upside and it popped with the other two indices coming out of the 13:00 ET reversal period. Since it was lower in the day's range though, it had a more difficult time breaking through the morning highs.

The Nasdaq continued to underperform into the afternoon. Heading into 14:00 ET it pulled back sharply into the earlier range, but the S&P 500 and Dow again began to base at highs. This created a second continuation pattern intraday in those two indices that triggered coming out of 15:00 ET. The weaker Nasdaq, however, was not able to break back over the 5 minute 20 sma. By the end of the session the Dow gained 20.09 points (falling just shy of 12k with highs of 11980.60), the S&P 500 gained 3.43 points, and the Nasdaq gained 6.55 points.

If we look at the 15 minute chart of the S&P 500, then we can see three strong waves of upside beginning at the afternoon lows on the 11th and continuing into the first half of Friday afternoon. After that the market started another corrective phase. The S&P 500 corrected about twice as long as the prior two and then took off on a fourth wave to highs. The Dow and Nasdaq were not as clear-cut on this, but when a stock or index has that 1-2-3--4 series of rallies then the most common follow-up is a larger correction that will break that trend. As a result, I am much more cautious on the long side than I was heading into Monday. A couple of stocks to keep an eye on for daytrading activity will be INTC, MER, NVLS, USB and UTX.

Economic Reports and Events
Oct. 17: Core PPI and PPI for Sep. (8:30 am), Net Foreign Purchases for Aug. (9:00 am), Capacity Utilization and Industrial Production for Sep. (9:15 ET)
Oct. 18: Building Permits, Core CPI, CPI, and Housing Starts for Sept. (8:30 am), Crude Inventories 10/13 (10:30 am)
Oct. 19: Initial Claims 10/14 (8:30 am), Leading Indicators for Sept. (10:00 am), Philadelphia Fed for Oct. (12:00 pm)
Oct. 20: -

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. 17: ADTN, ASD, ASO, BOT, CHTR, CSX, EMC, FRX, GAP, HWAY, ILMN, INTC, IBM, JEF, JNJ, KEY, LLTC, MER, MOT, NCC, NVLS, ODP, PKG, SOV, STT, SYK, STI, UTX, WFC, YHOO
Oct. 18: ABT, ADS, AMLN, AAPL, ASML, BSX, COF, CDWC, CIT, CTXS, CNB, CBSS, CBST, ET, EBAY, GD, GPC, ITW, RX, ISIL, JPM, JNPR, KEA, LHO, MEL, MOGN, MGI, NTRS, NCX, JNC, NVEC, OXY, PH, PLCM, RDN, RJF, RYL, SEIC, SSTI, SON, SPSN, STJ, SNV, TCB, TER, ALL, WM
Oct. 19: AVCT, BAC, BAX, BBT, BHE, BGG, BRCM, CNI, CERN, CHKP, C, CMA, CAL, CREE, C, DHR, DJ, ELNK, LLY, ENDP, EFX, EXAR, FCS, FITB, FSL, GOOG, HON, HBAN, HYSL, INFA, LRW, LSTR, LEG, MCD, MOLX, NE, NOK, NVS, NUE, OXPS, BTU, PMCS, POOL, DGX, RMBS, RBAK, RS, RHI, ROH, SNDK, SAP, SHW, SIRF, SLM, LUV, SPWR, SY, SYNA, ERIC, TPX, TXT, BK, KO, HSY, MHP, NDAQ, NYT, TRB, UNP, UB, UNH, VRSN, WCC, WSTL, WYE, XLNX, ZION
Oct. 20: MMM, ACI, CAT, ECL, MRK, NETC, SAY, SGP, SLB, VMSI
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.