Good morning! The market continued its bullish action from Wednesday with yesterday's session. The action was a bit more subdued, however, since the strength of the prior afternoon made for a slower continuation. This had a lot to do with the morning action. The day began with an upside gap in the SP500 and Dow Jones Ind. Ave., but a flatter open in the NASDAQ. The market was pretty extended intraday without any significant correction on even the 5 minute charts since mid-day on Wednesday. The response was a slower range out of the open with a bearish bias on the all sessions charts as the indices opened slightly down from the premarket trading levels before it broke lower.

The SP500 and Dow had the most room to move and very quickly closed the gap, which then served as price support at the 10:15 ET reversal period. I figured we would see a larger correction on the 15 minute charts since the drop was stronger, but when the gap closed, the market reacted rather swiftly to the support level and pivoted back into the zone of intraday highs. This started a Reverse Head & Shoulders pattern on the all sessions 5 minute charts (which take into account the premarket trading) and, when the indices then fell into a base at highs, a Phoenix also began to form intraday on that time frame. Hugging the 5 minute 20 sma zone on decreasing volume at the highs of the day really gave the market a bullish bias intraday.

The market broke higher just after 11:30 ET. The move ran to put in an equal move on the 5 minute charts as compared to the one off 10:15 ET lows, hitting that target perfectly. The indices then began to correct once more at a gradual pace. This left the door open for another upside move into the early afternoon, although the time of the day was a factor. Everything else pointed higher except for the pace within the base. Initially it was stronger on the downside than the upside and hence ran the risk of a shallow Avalanche and breakdown into the 15 minute 20 sma support, although in all other respects the pattern was bullish. The initial trigger around 13:00 on a channel break occurred before the pace had a chance to resolve itself within the range, but when it broke more solidly at 13:25 ET the pace had been able to turn over on the 1 minute charts and helped fuel a move to new intraday highs.

As you can see on the 5 minute charts, the breakout into the afternoon had a slower upside pace than the move into the base. This meant that an equal move would be more difficult to achieve and hence affected my target as I moved it to just under that equal move level, hence avoiding getting stuck in a more rapid correction. That came in the form of a 2-5 minute triangle from about 14:00-15:00 ET. The Dow had the best pace within the range and was able to pop once more. Since the upside was becoming more difficult, I really began to back off at this time. The daily breakout meant that a sharp drop was unlikely, but the highs breaking by a lesser degree signaled that the market as a whole would have a very rough time into the close. We can see after the fact by looking at the range that held for the remainder of the day.

All in all, it was a very good day for technical trading yesterday. The daily charts look like they have a bit more room to move before hitting strong resistance again with the prior weekly highs in the NASDAQ Composite, but intraday it has a risk for a correction on the 30 minute charts after nearly two days of upside. A rally like this does not tend to go for more than 2 1/2 days without putting in an intraday correction that breaks the 15 minute 20 sma support so we are closing in on that as we head into the weekend.

Updates: VAR from last Wed. around $38 hit new highs again on Wednesday at $40.09 before closing on the day with a base at highs ahead of earnings for swingtraders. For a larger position trade the weekly is still looking nice and I want the 20 week sma to hold. BCO is still of interest as a buy on a daily breakout.

Economic Reports and Events
July 29: Chain Deflator-Adv. For Q2 (8:30 am), Employment Cost Index for Q2 (8:30 am), GDP-Adv. For Q2 (8:30 am), Mich Sentiment-Rev. for July (9:45 am), Chicago PMI for July (10:00 am)
Aug 01: Construction Spending for Jun (10:00 am), ISM Index For July (10:00 am)
Aug 02: Personal Income for Jun (8:30 am), Personal Spending for Jun (8:30 am), Factory Orders for Jun (10:00 am), Auto Sales for July (12:00 am), Truck Sales for July (12:00 am)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
July 29: AEP (B), APC (B), ADM (B), BHI (B), CVX (B), CZN (B), CEG (?), LEA (B), MENT (?), MCO (B), WBR (B)
Aug 01: BRKS (A), CECO (?), ETR (B), EOP (A), GPRO (A), GGP (?), HUM (05:00 am ET), LNC (A), MVSN (A), MMC (?), MXIM (A), OIS (A), PEG (B), SBAC (A), PFG (A), TWTC (A), UCL (?)
Aug 02: CTAC (A), AOC (A), AUO (8:00 pm ET), BMC (A), BORL (?), CDIS (A), CEPH (A), CHTR (B), COH (B), CMCSA (?), CVH (B), CCI (A), EMR (?), INCY (?), IACI (B), MAS (?), MBI (?), NTES (9:00 pm ET), PXD (B), PPL (B), PRTL (A), PDLI (A), KWK (A), Q (B), RNWK (?), RDC (B), SRE (?), SIRI /B(, SBL (?), THC (?), RIG (B), TXU (?), TYC (B), UNTD (A), UNM (A), UTSI (A), VPHM (A), VSH (?)

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.