Good day! The market experienced another upside gap into the open on Wednesday, but the bulls once again had an extremely difficult time holding onto those gains. Not a lot happened for the first half hour when the indices just based along the resistance that hit at the open at Monday and Tuesday's highs. That changed dramatically after the 10:00 ET economic data was released.

Pending homes sales fell 1.1% in September, following a 4.7% increase in August. Home sales as a whole are down approximately 14% over the last year with building permits down 27%. Private residential construction spending also fell 1.1% in September, after a 1.6% decline in August. This was the 6th month in a row that spending in that sector has been declining. Federal construction spending fell 1.5% in September. Several sectors did experience increases. These included state and local construction spending and public construction outlays, as well as nonresidential construction spending.

In other news, the Institute for Supply Management reported a deceleration in factory activity in the United States in October. The ISM index, which was at 52.9% in September, fell to 51.2% in October. Analysts were anticipating an increase in the index to 53.2%. The report did contain a bit of a bright side. The price index fell from 61% to 47%. This indicates that inflation is currently under check.

The market fell quickly following the 10:00 data. The gap was closed in a matter of minutes and the selling continued into 10:30 ET where the indices hit price support from congestion the prior afternoon, as well as their 15 minute 20 simple moving averages. The accelerated selling pressure held back the bulls, even at the support, and the market found resistance at the 5 minute 20 sma as the 11:00 ET reversal period came around. The Nasdaq had experienced the least recovery off morning support and this relative weakness continued throughout the rest of the session.

The mid-day decline was not as extreme as the initial selling. There was more overlap in price from bar to bar and it took longer for the indices to move a given amount than before. This had me watching for an early afternoon correction off lows on the 15 minute charts as the indices fell into support from the lows of the prior day. This correction began shortly after 12:30 ET, but the upside remained limited. A third wave of selling on the 15 minute charts kicked off out of the 14:00 ET reversal period. This final move lower within the intraday trend lasted over 90 minutes and the Nasdaq' downside momentum again accelerated.

Volume increased substantially into the final hour of the day. All three indices had managed to pull back into their 20 day simple moving averages, something that had not occurred in the Dow since the end of September and nearly as long in the S&P 500 and Nasdaq Composite. By the closing bell the Dow has lows 0.4% on the day (49.71 points.) The S&P 500 fell 0.7%, or 10.14 points. The Nasdaq experienced the greatest decline overall, shedding 1.4%, or 32.26 points. The Dow's closing price of 12,031.02 places it perilously close to a break of the 12k level. On the larger perspective, however, the Dow has yet to actually break free of the 12k resistance level and it remains probable that this zone holds on the monthly charts for awhile.

On Thursday I would watch out for a break of the 15 minute 20 sma resistance. The indices have held that resistance after three moves lower, so a larger intraday correction off support will likely push at least the S&P 500 and Dow Jones over that particular resistance level early in the day. The remainder of the week still has a number of key reports due out, so these have the potential to sway the market early on like we saw on Wednesday.

Economic Reports and Events
Nov. 2: Initial Claims 10/28 (8:30 am), Productivity-Prel. for Q3 (8:30 am), Factory Orders for Sep. (10:00 am)
Nov. 3: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek for Oct. (8:30 am), ISM Services for Oct. (10:00 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.
Nov. 2: ACOR, AAP, AGU, APCC, ABC, AIV, AQNT, ILA, AVNX, ABX, BDX, BBI, BWNG, CA, CMX, CBS, CNP, CTL, CEPH, CPHD, CEM, CQB, CBB, CMS, COGT, CTSH, CSC, ED, CS, CROX, CVS, ERTS, HLTH, ENCY, ENR, ENTG, ENZN, FBR, GWT, GMST, GLBL, HS, HTCH, HYC, ICOS, INCY, ICE, IFF, IP, IRF, ICGE, MDR, MGM, NKTR, NSTC, NBIX, NSR, NEW, NXL, NI, OSG, PAAS, PDLI, PRFT, PQ, PDC, PWAV, PSA, QCOM, PWR, ROIAK, GOLD, RYI, TSG, SGMS, SRE, SINA, SIX, SFC, STN, SFY, BRLC, TLM, TSYS, TSO, PMI, THE, RIG, UN, UVN, USU, VRX, VPHM, WLT, WEBM, WDC, WLK, WFMI, WMBS
Nov. 3: AEE, DUK, EGO, HPOL, HNT, HRP, KSE, MHS, NRG, OMG, PGN, SRP, TTI, THQI, WR
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.