Good morning! As we went into Thursday morning, the market held the scenario whereby the market held Wednesday's closing highs early on that I talked about yesterday. As expected it was due to news, creating a modest downside gap into the open brought about in part due to a warning from HSBC Holdings, the world's third largest bank, that bad debt provisions would be about 20% higher than anticipated. The blame was placed squarely on the shoulders of the U.S. weak sub-prime lending market. New Century Financial Corp. (NEW) lost 36% when it warned of rising payment defaults which would lead to a fourth-quarter loss. This was the news needed to hold the market down and the S&Ps and Dow in particular felt the greatest pressure as banks sold off as well as home builders, after Toll Brothers Inc. (TOL) announced a decline in first-quarter revenues. The Nasdaq Composite continued to perform better as a result of the stronger daily support and tech sector.

Overall though, the market really still held the daily congestion its been in for the past week or so. The Dow did sell off to complete an equal move on the 15 minute decline as compared to the prior afternoon, establishing three waves of selling out of the open before finding support at the 20 day simple moving average at 10:45 ET. So, this index did break the lows of the week, but the S&P 500 held Tuesday's lows at the 11:00 ET correction period and the Nasdaq Composite held Wednesday afternoon's lows with the 9:45 ET correction period. While all three indices held support at reversal periods, notice the significant difference between the Nasdaq as compared to the other two.

The Nasdaq's intraday range narrowed into noon while the S&P 500 and Dow also fell into congestion zones along the lows. The pace began to turn around into noon, displaying slower selling on lighter volume to turn the bias over from bearish to bullish into noon. The 12:00 reversal zone held and the market soon broke higher through the 5 minute 20 sma. The market confirmed the momentum change by popping quickly to the upper end of the day's range in the S&P 500 and Nasdaq Composite. The Dow didn't quite make back all its morning losses, but did make it back to its 15 minute 20 sma resistance before the buying stalled out of the 13:00 ET correction period.







I ended up calling it a day fairly early in the afternoon when the choppiness and lack of patterns I favor led me to become rather leery of the afternoon prospects. At the 14:00 ET reversal period the 5 minute charts were more bearish, pulling higher at a slower rate than they were moving lower, but the 15 minute charts were more bullish. The 15 minute support won, but its victory was short-lived. The indices still held 30 minute resistance and the breakout ahead of 15:00 faltered once the 15:00 reversal period hit. The indices fell back with choppy trading for the final hour of the day. All in all, the Dow lost 29.24 points, the S&P 500 lost 1.71 points and the Nasdaq Composite lost 1.83 points by the end of the session.

I am expecting Friday to also be a fairly quiet day. The market could easily just continue to hold the range. There isn't much for a momentum bias right now on the 60 minute charts. It's a little on the bearish side, but not very significant. The 5 minute charts are still showing stronger upside moves, but they just aren't lasting that long so the larger time frames have a slower trend channel. It's unlikely that I will be doing too much on the day other than perhaps a daytrade or two. It is going to be more of a defensive day of trading.

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.