Good morning! The market got off to a slow start on the new week as many participants moved to the sidelines in advance of Tuesday's Fed policy meeting. The market did manage to put in a good showing during the morning's trading, however, propelled by continued activity on the merger front. Medical-devices company Biomet Inc. (BMET) gapped strongly higher on the day due to its take-over speculation with JNJ and SNN as two of the likely bidders. Citigroup Inc. (C) also climbed higher throughout the day after breaking out of its recent range on Friday. The company has been reported to have made an unsolicited offer for Egg, an internet bank owned by Prudential PLC (PUK).

The day began on Monday with a continuation of the closing correction from Friday, but turned around quickly with the 9:45 am ET reversal period. The market rallied considerably at that time, particularly in the Nasdaq Composite, breaking through Friday's highs into the 10:15 ET reversal period. While this reversal period held well, the momentum into it left the market unable to reverse again very quickly. Instead it began to slow along the highs. The market pulled back into the 5 minute 20 simple moving average support in the S&P 500 and Dow Jones Industrial Average. The support hit at the next reversal period of 10:45 ET and then the indices began to hug the support heading into lunch. The volume continued to wane throughout this correction and the support finally gave way into noon, dropping the indices back into their 15 minute 20 sma support levels mid-day.

The market remained in a trading range for the rest of the session. The indices pulled back up into the prior 5 minute range into the early afternoon, but then turned over at that resistance level around 13:30 ET and held that afternoon high for the remainder of the day. The market closed at about the middle of its range for the day, adding 20.99 points on the Dow Jones Ind. Ave., 5.50 points on the Nasdaq Composite, and 3.20 points on the S&P 500. 

Tuesday brings with it another FOMC rate announcement. The Fed is expected to leave interest rates unchanged, so most of the interest will be focused upon the accompanying statement to try to get a feel for the Fed's thoughts regarding the recent economic data and how that will affect the potential for rate cuts in the new year. A lot times the market will see buying on the day of a Fed meeting, but then the activity will drop off over noon, so the best trading tends to come in the first hour. As volume declines mid-day, the risk for new intraday trades increases dramatically as traders move to the sidelines ahead of the 2:15 announcement. Following it, the activity tends to occur in three waves. There is usually an initial move, followed by a second reactionary move and then a third back in the same direction as the first.

Economic Reports and Events This Week
Monday: Wholesale Inventories for Oct. (10:00 am)
Tuesday: Trade Balance for Oct. (8:30 am), Treasury Budget for Nov. (2:00 am), FOMC policy statement (2:15 pm)
Wednesday: Business Inventories for Oct. (8:30 am), Retail Sales for Nov. (8:30 am), Business Inventories for Oct. (10:00 am), Crude Inventories for Oct. for 12/8 (10:30 am)
Thursday: Export Prices ex-ag. for Nov. (8:30 am), Import Prices ex-oil for Nov. (8:30 am), Initial Claims 12/9 (8:30 am)
Friday: CPI and Core CPI for Nov. (8:30 am), NY Empire State Index for Dec. (8:30 am), Net Foreign Purchases for Oct. (9:00 am), Capacity Utilization for Nov. (9:15 am), Industrial Production for Nov. (9:15 am)

Key Earnings Announcements This Week
Monday: ALOG, MTN, SORC, SEH, and VRNT.
Tuesday: BBY, DG, GS, ABM, ADCT, CKR, COO, CPII, MATK, and TUTR.
Wednesday: ZOLT.
Thursday: STST, ASFI, BECN, BSC, CIEN, COST, LEH, MGAM, PIR, WGO ADBE, ZQK, TEK, and VSTA.
Friday: No companies are scheduled to report.
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance and Briefing.com. 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.