Good morning! The market had a rough day of trading on Wednesday. We got the more bearish bias we were expecting heading into the session after the market had hugged the lower end of the trading range from the previous four days of trading, but a large chunk of the selling came before the market even opened. The indices gapped down after a weaker-than-expected durable goods report showed that capital spending has fallen in four out of the past five months. Orders for durable goods rose only 2.5% as opposed to the anticipated 3.8% gain. Excluding transportation, orders fell 0.1% as opposed to increasing 1.8% as expected. This took the indices into strong 15 minute support at the 200 sma zone intraday and Monday's lows in the case of the S&P 500. It forestalled continued selling -- at least for awhile.

The market failed to react strongly to the support, instead hugging it and falling into a range that lasted until the 10:30 ET oil data. The market then plummeted, selling off until the 10:45 ET correction period. This led to a break of the 10 day sma support that had hit at the open and the market began to drop into the 20 sma zone. This hit in the weaker Dow at the same time as the 10:45 ET correction period and the support held. After the pace slowed, the bulls returned and the market popped back up into the 5 minute 20 sma resistance.

Although the indices initially reacted strongly to the 5 minute 20 sma, they began to hug it on declining volume into noon, breaking through it coming out of that correction period. The momentum increased until the Nasdaq had closed its morning gap and all three indices made their way back into resistance on their 15 minute time frames. This included the 15 minute 20 and 200 sma on the Dow and the previous day's lows in the S&P 500. It also corresponded to the 5 minute 200 sma intraday in the Nasdaq. Despite the pace into that resistance, the convergence of so many levels at once was too much for the bulls and the market slowly turned around.

The Nasdaq took the lead on the selloff. The 5 minute 20 sma became support and the indices hugged it on light volume, eventually giving way to stronger selling again into the 14:00 ET correction period. This sharp decline took the market all the way back to the late morning congestion. The support held and the indices became more choppy again into the close, failing to form a nice bear flag by putting in a slightly lower low just before 15:00 ET. It still broke lower though into the last 30 minutes and the Nasdaq closed at intraday lows. The Dow ($DJI) lost nearly 100 points on the day (-96.93), while the S&Ps ($SPX) fell 11.38 points and the Nasdaq ($COMPX) lost 20.33 points.







Heading into Thursday my bias in the market remains more bearish. The next support is going to be the 20 day sma in the Nasdaq and S&P 500 and the price levels from the 16th and 17th of this month. If the 20 day sma holds, then a Cup with Handle on the daily time frame is still possible, otherwise I'd expect some support at previous daily lows, but it will be easier to again try for the 200 day sma that we were looking at a few weeks ago.

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.