Good morning! Tuesday's Fed day was a rough one for the market. Usually the indices will hold up at least in the early trading on the day of a policy meeting, but the market opened slightly lower this time around and then got stuck in a range throughout most of the morning. The S&P 500 and Dow Jones Industrial Average both moved slightly higher initially, but the Nasdaq Composite made new lows on the day after closing the gap within the first few minutes. It then joined the other two in a trading range until 11:30 ET. Volume dropped off a great deal at that time as the upside pace within the range began to slow. Finally the range gave way to strong selling into noon.

It's a bit unusual to see such a significant intraday move in the market on the day of a Fed meeting. The selling finally exhausted itself as the indices fell hard into Friday's morning lows. Volume increased dramatically despite the norm course of action on such a day. The hard landing made a strong recovery more difficult, but the indices did manage to recoup some of their losses into the early afternoon. An initial bounce was followed by a base along resistance, creating a 5 minute Phoenix pattern which was able to break higher between 13:00-13:30 ET. A bull flag then formed on the 5 minute charts ahead of the 14:15 ET Fed announcement.

As anticipated, the Fed left interest rates unchanged this time around. In their accompanying statement they held their bias towards more tightening, viewing inflation as still being a risk. This closed the door for many who were looking for rate cuts next year. The market took the news fairly well initially, breaking higher out of the 5 minute bull flag and quickly returning to its pre-breakdown levels from earlier in the session. Once that strong resistance level hit, however, the market rolled back over and returned to the congestion from which it had just broken free of. This also corresponded with the 5 minute 20 simple moving averages in the indices, which served as additional support. These above average moves back and forth pushed the indices into a trading range for the remainder of the session and the third reactionary wave following the Fed was unable to break the resistance from the prior intraday highs. The Dow ended up losing 12.90 points on the day, while the S&P 500 fell 1.48 points and the Nasdaq Composite fell 11.26 points.

The daily chart of the Nasdaq Composite is still forming the Avalanche breakdown type of pattern we were looking at a few days ago. The strong decline intraday on Tuesday, followed by the choppier upside also support a change in pace for further selling. There is now a risk, however, that the market will end up making another attempt at highs, because the congestion along the support in the Nasdaq is now longer than is ideal for a strong continuation pattern on a breakdown. The S&Ps and Dow are also a bit more bullish with regard to their intraday momentum on the 60 minute charts. As a result, I a bit more on the bullish side heading into Wednesday than the other way around.

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.