Good day! As the week winds to a close, the NASDAQ continues to underperform compared to the SP500 and Dow Jones Ind. Ave. We saw the pullback I was looking for come early on in the day, starting with a gap down into the open. After some initial choppiness, the market broke lower again into the 10:15 ET reversal period in the NASDAQ and 10:45 ET reversal period in the stronger SP and Dow.

The selling was steady and strong in the NASDAQ while the other two indices barely broke prior lows before falling once again into a trading range. This time the range was much narrower though and volume really dropped off. The NASDAQ also formed a low level base with the 5 minute 20 sma overhead, but since it had dropped so far already into its 10 day sma support, it was much more exhausted than the other two. As such, I chose to short the SP500 going into the 12:00 ET reversal period off the 5 min. 20 sma as the range first attempted a breakdown.

As you can see, I ended up being a bit early on my short, but the resistance continued to hold and we finally saw a second breakdown into about 12:30 ET. This led into the 13:00 ET reversal period when the SP500 and Dow both hit equal move support on the 5 minute charts. Since the NASDAQ was so oversold already intraday, I had to treat this mid-day breakdown as a scalp and bailed into this support. It was also the third wave of selling on the all sessions 5 minute charts, so it showed that the market was due for a longer correction into the afternoon.

I had to take off a bit early on Thursday, so I didn't get to follow the market into the close, but it looks like my bias to stick to daytrades was a good one since the market held up pretty well for the rest of the day. The pace in the market turned over going into 13:30 ET when the indices broke strongly through their 5 minute 20 simple moving averages. As the SP500 and NASDAQ then hit their 15 minute 20 sma resistance, they fall into a range along it, creating a 15 minute Phoenix pattern out of a Cup with Handle in the NASDAQ and Reverse Head & Shoulders in the SP500.

As we head into the weekend, the NASDAQ continues to look very weak. I am watching the 30-60 minute charts for a nice intraday breakdown setup. Pay attention to the 5 minute charts though to help with timing based on smaller intraday setups. The SP500 and Dow on the other hand are looking more range bound on the 30 and 60 minute charts and look like they would have better odds of trying to break higher again next week. At this point though, continue to use greater caution in regard to longs.

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.