Good morning! The market has done a nice job the last couple of days indicating the momentum it planned on favoring heading into the next day. First it favored selling on Tuesday morning and then it turned around to favor buying into Wednesday morning. The market indeed took that bias and ran with it. True, the day got off to a slow start initially, but many stocks broke out of daily ranges with large gaps and continued those moves out of the open.

The Nasdaq had the largest upside gap and attempted to fill it, but held the 5 minute 20 sma support and the market took off to new intraday highs with the 10:15 ET reversal period. The pace increased dramatically on the Nasdaq with this rally, but it was the Dow that set records. It ran to new all-time highs at 12700.28, but failed to break that solid 12700 price resistance zone. As that hit with the 10:45-11:00 reversal periods, the momentum in the indices slowed and began to turn around.

The late morning correction from highs was gradual to begin with. I actually attempted a short in the NQ around 10:50ish, but scratched it just before it went to make a slightly higher high into 11:05 ET. Without seeing another real turn around in pace, I went to grab some lunch and wait see how the afternoon would shape up. The momentum over mid-day actually remained more bullish to begin with. In fact, the indices bounced off the 5 minute 20 sma support zone at the 12:00 reversal period and triggered a buy around 12:40. The extension on the Nasdaq 30 minute charts, however, meant that the overall time it took to correct into that setup was not strong enough to sustain it for anything more than a scalp.

I was virtually guaranteed a retest of the 1825 zone in the NQ, but after that things remained more uncertain. In order for the indices to make new highs again, the market needed to maintain a stronger than average upside within the larger range as compared to the downside. The indices pulled back to the 5 minute 20 sma at 13:30 too sharply, however, and instead of basing nicely into that support it created the higher potential for an afternoon breakdown. With very little news to sustain the rally, the sellers soon grabbed the lead and the indices fell into the 14:00 correction period after afternoon highs held coming out of the 13:00 ET correction period. This had me favoring a bear flag to continue the selling into the latter half of the afternoon.







The Dow based right along its 5 minute 200 sma support while the S&Ps reacted to the morning congestion as support and the Nasdaq came back into the highs of the prior several trading days. They held those levels until breaking down again into 14:30. This time the momentum increased and took the Dow and S&Ps into new intraday lows, creating an exhaustion move and finding support around 14:45 ET. Given the pace of this descent, it was the measured move support level that hit at the same time as the QQQQ hit its 15 minute 20 sma support and the S&P 500 came into Tuesday's lows and the market held this larger time frame support quite well heading into the final hour of trading. It retraced nicely off the lows and into the 5 minute 20 sma, hitting that resistance at the same time as the last reversal period of the day: 15:30 ET. It held the larger range though and was able to break the 5 minute resistance before the close.

The ability for the Nasdaq to move to higher levels and break the range of the past week while the other two indices struggled goes back to what we were looking at a few days ago. The Nasdaq simply had stronger daily support and more room to move, while the S&P 500 and the Dow had been more extended on the daily charts. The Nasdaq also had more help brought about by earnings and other news events tied to the tech sector while the S&Ps and Dow were weighed down by the oil and energy-related securities. The Nasdaq Composite climbed 19.01 points, while the S&P 500 rose 2.02 points, but the Dow ended the day with a gain of only 0.6 point.

Going into Thursday the market is still looking range-bound. The bounce off the afternoon lows was enough to take back a nice portion of the mid-afternoon losses and this means that the pace is not yet beginning to show a favor towards breaking from one end of the range or the other. The highs from Wednesday will serve as resistance on Thursday, but if the indices end up holding the middle of the range as a result of any of the early morning data or earnings, then it might be enough to turn things over to favor more of a breakdown. Right now, however, there is nothing to suggest that the selling the market experienced on Wednesday will continue into Thursday.

Economic Reports and Events This Week
Monday: ISM Services for Jan. (10:00 am)
Tuesday: -
Wednesday: Productivity - Prel. for Q4 (8:30 am), Crude Inventories 2/2 (10:30 am), Consumer Credit for Dec. (3:00 pm)
Thursday: Initial Claims 2/3 (8:30 am), Wholesale Inventories for Dec. (10:00 am)
Friday: -

Key Earnings Announcements This Week
Monday: ATRS, CTSH, HERO, HUM, IPS, OSTK, PMI, APC, BLKB, EW, IKAN, LVS, QSII, RCII, SOHU, TZIX, and WMS
Tuesday: ADP, RATE, ELNK, IACI, ISE, LFUS, NOOF, TYC, WWY, ACTS, CELL, BOBJ, CAKE, CSCO, XRAY, WIRE, GCOM, IVAC, RENT, TWTC, and TZOO
Wednesday: ARXT, DTV, NRGY, ICE, MEDI, NSW.A, OSIS, SNWL, AKAM, ACL, ROCK, MOGN, PACR, and DIS
Thursday: AUO, CSK, CXW, DO, ESRX, FLIR, RAIL, GCA, LCLT, MGAM, PMTI, PENN, PEP, Q, RAI, TRB, WMI, KAR, BMC, BRCM, CSTR, DRIV, DIVX, DRRX, EQ, ITMN, LPNT, NAPS, NEW, PNRA, PWAV, SIMG, SPRT, and VSTA
Friday: ALU, CVH, MA, NNI, QMED, WY, and WLSC
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 your positions!

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.