Good day! It was a rough and tumble day for the market on Thursday. An uneventful open was followed by some strong buying out of the 9:45 ET reversal period. The Nasdaq ran into resistance at the 15 minute 20 sma, the S&Ps hit resistance at the previous day's mid-day trading range, but the Dow Jones Ind. Ave. surged, spiking to new all-time highs. Out of the Dow, BA, UPS, and WMT were nevertheless among the few stocks that managed to close higher on the day. After the early morning run, most of the market turned over, breaking the 1 min uptrend into the 10:15 ET correction period.

The momentum on the upside kept the sellers from taking a strong hold on the market right away upon reversing. Instead there was some hesitation into 10:30 ET to help change the pace on move. When that small congestion at the 5 minute 20 sma broke lower the momentum increased and took the indices back into the morning lows by 11:00 ET. A somewhat longer correction, albeit still briefer than usual, followed and led to new lows into 11:30 ET. Even though the market went on to continue lower throughout the remainder of the session creating the strongest one day decline in the Nasdaq since February, this morning drop was the strongest move of the day and the rest of the session was quite choppy.

Over noon the indices pulled up to their 5 minute 20 simple moving average resistance. This hit at the 12:00 ET correction period and led to another test of the lows. These lows broke slightly and the market attempted a 2B reversal shortly after 12:30 ET, but was unable to gain any upside momentum and instead fell into a bear flag on the 15 minute time frame. Volume dropped off as the market congested along the lows, finally triggering a continuation on the downside out of the 14:00 ET correction period. The entire mid-day range was not quite long enough for the indices to build up enough momentum to drop as quickly as before, however, and the trend into the close was not much better than the trading that took place within that last 15 minute flag. Instead it just chopped lower with a great deal of overlap from bar to bar on both the 5 and 15 minute time frames, creating higher risk of getting flushed out on any short position.







Thursday ended only a few ticks off the day's lows. The Dow ($DJI) lost 84.52 points, the S&Ps ($SPX) lost 14.77 points, and the Nasdaq ($COMPX) dropped 39.13 points. As on Wednesday, this end-of-day trading took place right into support levels, such as previous lows and the S&Ps 20 day sma. This again leaves room for another correction up off these levels like we expected yesterday. Nevertheless, there is still a lot of room for the market to continue to pull lower, so I would view any upside from more of a short-term, daytrading or scalping perspective on Friday. Trading is also going to be lighter on Friday as a result of the markets being closed on Monday, so the best trading will tend to take place in the morning with higher risk in the afternoon.

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.