Good morning! The market managed a very nice continuation on Thursday given the already extensive rally that had taken place as a result of Wednesday's monumental Fed move. The buying was not nearly as extreme as the day before, but all three of the major indices made new highs on the week and the S&P 500 and Dow Jones Ind. Ave. They made new highs on the year almost right away out of the open. This early morning trading was an extension of the prior afternoon's action, propelled onward following the 8:30 am release of December's personal income and personal spending reports. The first rose 0.5%, while the second rose 0.7%. Each of these matched economists' forecasts. The initial jobless claims were also released at this time, falling 20K to 307K, while the consensus had been for a move to 315K.

While the economic data added additional momentum to the prior day's move, it also halted the move. At 10:00 ET the ISM Index for January came out with a reading of 49.4 versus the expected 51.7. Core inflation rose unexpectedly by 0.1%, while real consumer spending rose 0.3% and real disposable incomes rose only 0.2%, which was the weakest growth since May. All in all, the market was not pleased and the bears quickly took over, attempting to close the morning gap as the 10:15 ET reversal period rolled around. The Nasdaq did manage to do just that soon thereafter, although the S&Ps and Dow did come close. The support from the gap area held and the market corrected off those lows over the next 30 minutes.

This mid-morning bounce is where the market really began to diverge. While the S&Ps and Dow moved strong back into the morning highs, the Nasdaq was unable to shake the 5 minute 20 simple moving average that loomed overhead. It held near the intraday lows while the S&Ps and Dow formed double tops on the 5 minute charts. The Dow made a slightly higher high, trapping bulls on a form of double top I refer to as a 2T. The Nasdaq, however, formed a Head and Shoulders short pattern, whereby the left shoulder took place into the prior day's close. Intraday the breakdown took the form of a pattern I call an Avalanche. All of these triggered with the help of the 10:45 ET reversal period and sharp selling soon commenced.







The pace was slightly increased over the initial decline in the Nasdaq and the index managed to put in a slightly larger than equal move. The S&Ps completely closed their morning gap and the Nasdaq Composite found support at the prior morning's highs at the same time as the 11:15 correction period hit. All three indices moved slowly higher until the 12:00 reversal period hit. The Nasdaq did its best to make it back into the morning lows, taking almost 30 minutes longer to find support than in the S&P 500 and Dow. This gave those two a head up on the continuation of the correction off lows as the afternoon progressed. They resumed the climb to new intraday highs until the last 45 minutes or so of the session, but the Nasdaq never broke free from the mid-day highs.

At the end of the day the Dow Jones Industrial Average had tacked on 51.99 points (0.4%), the S&P 500 gained 7.70 points (0.5%), and the Nasdaq Composite had risen 4.45 points (0.2%). Among the top gainers were F, A, CAT, DD, and UAUA. GOOG, DELL, and HPQ all fell sharply. DELL had huge gains initially, but gave them all back and then some before the closing bell.

The economic data continues into Friday with the jobs data, followed by December's factory orders and the Michigan sentiment. The market keeps teasing us on the potential for a larger correction on the monthly charts, looking exhausted on the larger weekly and monthly charts, but failing to turn around on the daily and intraday charts for more than a couple of days at a time. So far there has been no confirmation of reversal action, but the indices are now beginning to become overbought again on the 120 minute charts. I would wait for some more rounded highs intraday, however, before placing much on the short side.

Economic Reports and Events This Week
Monday: ...
Tuesday: ...
Wednesday: Employment Cost Index, GDP-Adv., and Chain Deflator-Adv. for Q4 (8:30 am), Chicago PMI for Jan. (9:45 am), Construction Spending for Dec. (10:00 am), Crude Inventories 1/26 (10:30 am), FOMC Policy Statement (2:15 pm)
Thursday: Personal Income, Personal Spending and Initial Claims (8:30 am), ISM Index for Jan. (10:00 am), Auto and Truck Sales for Jan. (5:00 pm)
Friday: Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek for Jan. (8:30 am), Factory Orders for Dec. (10:00 am), Michigan Sentiment-Rev. for Jan. (10:00 am)

Key Earnings Announcements This Week
Monday: ...
Tuesday: ...
Wednesday: AL, AGN, ADS, MO, AVB, BOT, CRUS, CEG, CCK, CUTR, DLLR, D, DOV, EK, LLY, FDRY, GILD, GOOG, HLIT, HES, HOLX, HYDL, JDSU, MCHP, PHM, SEPR, SLAB, SBUX, SRI, STE, SUN, TSRA, BA, VRSN, WEBX, XEL
Thursday: AMZN, BUD, APA, CA, DIGE, XOM, HAIN, HP, ITWO, INSP, MRO, MNST, MUR, MYL, NURO, RTN, HOT, BCO, UTEK, VLO, VRTX
Friday: ACI, CAM, CVX, HMY, NYX, R, THQI, WEN
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. This list is not a complete list of earnings, so always double check!

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.