Good morning! While the market started off on this shortened trading week with a bit of a downside gap on Tuesday, followed by a narrow trading range, the weakness didn't last long. At 10:00 ET the U.S. Factory order numbers came out, increasing 2.9% in May. This beat the 2.8% estimates and was the largest gain in 14 months. Some news from WMT for stronger than expected June sales also helped. From that point on the market reacted in typical news euphoria fashion. We saw an initial strong wave of buying that took the SP500 into its 15 minute 200 sma and the NASDAQ Comp. into its 5 minute 200 sma resistance. This stalled the move for a few minutes as it created a 2 minute bull flag coming out of the 10:15 reversal period. The indices then broke higher until the SP500 came into Thursday highs and the NASDAQ hit its own 15 minute 200 sma resistance.

By this point I figured that the market was pretty much done for the day, especially the NASDAQ, which had put in pretty close to an average day's move in just under an hour. As such, I was looking for some rounding off at highs into the afternoon. We saw this take place on the 5 minute charts coming out of the 11:00 ET reversal period that hit at the same time the resistance levels did. For the most part, the 5 minute 20 sma zone held, however, and the market made some slightly higher highs. In the more extended NASDAQ the break was very small. The same was true of the Dow Jones Ind. Ave. The SP500 broke by a bit more though until the Dow hit its 15 minute 200 sma and it and the NASDAQ came into daily moving average resistance going into the 13:00 ET reversal period.

At a time when folks usually start to come back from lunch, the volume declined in the market. While the indices began to correct once more on the larger intraday time frames, the downside pace was more gradual than the upside pace, making it difficult for the range to turn over and sell off. Instead, support levels from prior breakout zones intraday held well and the market just fell into a range for the remainder of the day.

So far the market is holding yesterday morning's expectations of a daily trading range for a few days, followed by more downside in about a week. The bounce off the lows of the range yesterday has merely brought the indices back up near the highs of it. A bit of an upward tilt to the range would not be unusual though for the market to still be able to sell off.  The only con is the slightly lower low in the NASDAQ that it made yesterday morning. This could have trapped a few bears.

The upside pace intraday at this point on the 15-60 minute charts is stronger than on the downside, but since the base is not too developed yet, that is not a big deal. There is still time for it to turn over, which would be ideal for a breakdown scenario. Holding with action anticipated above, I would expect that more intraday upside would be rather limited at this point intraday, although some slightly higher highs would still be reasonable. I will continue to stick more to daytrading at the moment due to the range and larger daily resistance that hit a few weeks ago.

Economic Reports and Events
July 06: ISM Services for Jun (10:00 am)
July 07: Initial Claims 07/02 (8:30 am)
July 08: Average Workweek for Jun (8:30 am), Hourly Earning for Jun (8:30 am), Nonfarm Payrolls for Jun (8:30 am), Unemployment Rate for Jun (8:30 am), Wholesale Inventories for May (10:00 am), Consumer Credit for May (3:00 pm)
July 11: -
July 12: -

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 stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
July 06: SCHN (B)
July 07: CAN (A), AA (A), FLE (B), LI (?), PBG (B)
July 08: -
July 11: DNA (A), PKX (B)
July 12: AMTD (B), MI (B), PEP (?)

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.