As many of us were sleeping soundly, London was rocked by four terrorist bombings, sending the futures plummeting shortly after 4:00 am ET. Coming just a day after London was rejoicing its winning bid for the Olympics, the attacks coincided with the opening of the G8 finance ministers in Scotland. My heart goes out to those of you who have been affected by such atrocities and for those helping to protect every nation against violence and the taking of innocent lives.

The futures did manage to pull back up in the premarket hours after hitting lows around 6:30 am ET. News such as this will often create a short term decline, but they can more easily regain the lost ground since the selling was not a reaction to market-related or stock-related news. Well over half of the premarket losses were taken back by the time the regular trading session began. This did put a damper in my plans on the daily charts though. The gap broke the range of the prior few weeks earlier than is ideal for a strong drop on the daily charts for swingtrade short opportunities. It was like a race where an unrelated bang has participants breaking out of the gates only to have to turn back around halfway down the track. Whether they try again or not is yet to be seen, but this type of false start will often lead to a slower one if it does.

The intraday activity was actually pretty nice on Thursday. After a slow open the market hit strong resistance at the 9:45 ET reversal period when the NASDAQ came into the prior day's lows. This led to a range for the next hour. Even though the market still looked pretty weak intraday, large gaps in the indices are difficult to sustain. The pace within the range was also slightly slower on the downside. Hence, the triangle that formed was one that was very prone to a false start in one direction, only to reverse and truly follow through in the other. As such, I was not willing to short at that point and the 11:00 ET reversal period held, allowing the shorter term bears a little move, but giving into the more prominent bulls. The upside pace increased and soon the indices were forming a 5 minute cup with handle, basing along highs in the SP500.

The pattern that formed on the 5 minute charts was a rather sloppy one. This is because the handle in the SP500 and the Dow Jones Ind. Ave. had some slightly rounded highs to begin with. The NASDAQ, however, based more consistently and by the time the 12:00 ET reversal period hit the bullish setup was triggering. Follow through was swift and decisive. Soon the gap created by the news was closed and the upside served to help support the market into the afternoon. The 5 minute 20 sma held very well and the indices kept making new highs into the close, holding both support and resistance levels very well.

Going into Friday we are likely to have a more narrow trading range. A lot hangs on the premarket jobs data. Expected or lower than expected numbers could easily give way to more selling.  I still remain more bearish overall, but because of yesterday's early break in the range, my bias is not as strong. 

I'll be gone for all of next week to attend the trading expo in Chicago and fit in a visit with family and friends while I'm in the Mid-West (assuming of course that Hurricane Dennis let me get out of here Sunday!.) This column will resume again on the 18th. Good trading!

Economic Reports and Events
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 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.