Good morning! On Friday the market held with the trend of the larger daily trading range and congestion which had permeated trading throughout the past week and a half. The indices opened relatively flat on the session, but popped with the 9:45 ET correction period, continuing the late day trend from Thursday. The surge was short-lived, but the move was quite pronounced. It took the market back into Thursday's highs. These held perfectly in the Nasdaq Composite, but the stronger Dow pushed a bit further, filling the gap from Tuesday's close before turning over.

A move such as that which occurred from Thursday into Friday will tend to take most of the next day to correct, even when it resumes the trend with a breakout higher the next afternoon. As a result, even though the market began to pull back at a more gradual pace than the upside, I shied away from new longs. The indices found support at the 5 minute 20 sma and then began to hug that support zone, creating a 5 minute Avalanche short pattern as volume declined into the 11:15 ET correction period.

The selling quickly gained momentum once the support gave way. The decline was so sure of itself that the indices barely flinched when the 15 minute 20 sma hit. This support roughly corresponded to the equal move drop out of the Avalanche as compared to the initial move off highs. At that point the market formed a small continuation pattern, hugging the support for about 15 minutes before it gave way to another wave of selling into lunch.

The third decline intraday was by far the strongest in terms of momentum. It pushed the market back into the lows of the daily trading range. Volume spiked as the move exhausted itself at 11:45 ET and the market quickly popped back up, taking back most of the losses from the last decline. Even though this was a strong move, the previous selloff was so strong that the overall correction off lows would have a more difficult time regaining all of the losses without taking more time to do so.

The result of the morning selling pace was a series of small, yet rapid upside moves as the market corrected off the lows, broken up by longer congestion zones on the 5 minute charts. Thus, even though there was some stronger pace within the bounce on the 15 minute time frame, the overall appearance of the rally on that time frame was much more gradual than the morning decline. It took about 5 times as long to make it back to the 11:15 breakdown level after making lows mid-day than it took to get to those lows in the first place. Once it had retaken that price level, however, it served as very strong resistance and the market fell into a trading range for the last 75 minutes of the day.







Heading into last weekend the market was still holding up well enough to form a cup with handle formation on the daily time frame. For this potential to have continued well, I would have liked to have seen more of a bounce on Friday to keep it in a more solid range along the highs. Instead, weakness dominated the session and the slower upside into the afternoon is bearish as well. This has me learning towards more selling in the week ahead.

The biggest data of the week this week comes on Friday with the jobs data. Even though the market will not be open on Friday to react immediately to the news in anything other than the bonds and currencies, there are still going to be enough news events to weigh heavily on the markets. The survey on manufacturing activity in March from the Institute for Supply Management comes out Monday, followed by auto sales on Tuesday to reflect consumer spending, as well as earning from BBY and CC. To top it off, warning season for upcoming earnings begins this week as well, while earnings season itself begins on April 10.

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.