Good day! The market had a tough time on Monday. It began out of the open with fewer of the strong momentum gaps that we had seen last week. This made for a very inactive morning for me since very few stocks displayed enough of the criteria I was looking for in high probability setups and the overall market itself was also struggling. The weakness from the late day turnover on Friday continued into Monday morning, but lacked any real conviction. Market participants seemed a bit on edge... not quite sure which way to commit. The rolled over into the second half of the morning, retesting the upper trend channel from the prior couple of sessions, but then reversed again with the exact same reversal pattern from 10:30-12:00 ET as had occurred from 13:30-15:45 ET on Friday afternoon.

The 12:00 ET reversal period on Monday held well. The momentum diverged a great deal between the three indices though. The Dow rallied strongly to new all-time highs, but the move was not accompanied by any volume confirmation. At the same time, the Nasdaq Composite failed to let go of the lower end of the 30 minute trend channel. All three indices had an issue with the upside pace within the larger 15 minute correction. By the mid-afternoon the upside moves on the 1 minute charts were substantially weaker than the downside ones and this favored a bearish bias into the afternoon.

The Nasdaq showed the most clear-cut short pattern, hitting the uptrend line at 13:25 and holding it into 13:50 ET. When that supper level gave way, it triggered the afternoon breakdown into the 14:00 ET reversal period. The momentum was slow to begin with, but with little standing in the way in terms of support other than the lower end of the 60 minute range, there was a great deal of room for the market to fall intraday. The market still managed to hit that initial support within only about half an hour. It then rested into 15:00 ET, but when a market moves begins slowly, the momentum tends to continue to build and an even stronger breakdown took place into the last half hour of trading, leading to a sharp decline into the close.







The Dow Jones Ind. Ave. ($INDU) lost 58.03 points (-0,4%) on Monday. AA, AXP, CAT, HON, INTC, and MCD all had a rough session. A few exceptions that managed to post gains were PG, C, VZ, IBM, and MMM. VZ actually has a nice breakout triggering a buy on the daily time frame as a swingtrade. The S&P 500 ($SPX) posted somewhat larger losses, ending lower by 11.71 points (-0.8%). The Nasdaq Composite, however, felt the greatest pressure. It fell 32.12 points, or 1.3%. Nevertheless, it still ended the month with a gain of 4.1%. Following Monday's retracement, I am leaning towards a trading range over the next week or two. Support will be the 20 day simple moving averages indices.

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.