Most of the activity in the market on Monday took place before 10:00 ET. After flipping to move higher into the final 30 minutes of trading on Friday, the indices continued the momentum into Monday morning with a gap higher. The move stalled at some previous highs on the 15 minute charts before resuming to the upside out of the 9:45 ET correction period for a rapid 15 minute rally. June's ISM Manufacturing Business Index came out at that time, but had very little impact on market direction. The data came in a full point higher than the previous month, at 56.0%. This was 0.9% higher than expected and indicates the highest level of production since July of 2004. The report also suggested that core inflation is moderating, so it has increased speculation that the Fed will soon lower interest rates.



With little news generated from earnings results and earnings warnings, much of the momentum at present is from stock buyouts and mergers. On Monday the most notable of these was an agreement by AT&T (T) to buy Dobson Communications (DCEL) at $13/share. BCE Inc. (BCE) also received a strong boost when a group led by the Ontario Teachers Pension Plan reached an agreement to purchase it for $40.13/share. Manor Care Inc. (HCR), which has been a favorite stock of min in recent years, had a much more subdued reaction due to earlier hype back in April of a pending buyout and was nonplused by the official announcement for a buyout from a private-equity firm for about $6.3 billion. A huge drawback to merger and acquisition news is that once a price has been agreed upon, the takeover stock often has very little intraday price change and is not a great candidate at that point for daytrading. The best movers on this type of news are when the first waves of speculation hit, but before a price has been settled upon, and that was not the case with Monday's announcements.



After the market hit strong resistance from the highs of last week, trading slowed a great deal. The market fell into a narrow trading range and the volume dropped off to levels similar to last week's pre-Fed trading on Thursday with similar results. The momentum began to turn over somewhat as the afternoon progressed, and even though the market overall did not make any notable gains, a few select individual stocks managed to shine. EXC, CLF, NOV, DO and CMI were among the top NYSE performers, while BIDU, JASO, FWLT, and FSLR were some the strongest late day leaders in the Nasdaq Comp. RIMM, however, outshone these in terms of overall daily performance thanks to a strong morning move on the heels of Friday's stronger-than-expected Q1 fiscal results that had boosted the stock by more than 20% in that session alone.



The market closed on a positive note at the end of the day on Monday with all three indices winding down the session at the day's highs. The Dow Jones Industrial Average ($DJI) posted gains of 126.81 points, while the S&P 500 ($SPX) rose 16.08 points and the Nasdaq Composite ($COMPX) added 29.07 points. The closing action is most favorable for more upside on Tuesday, and the narrow range throughout most of the session on Monday leaves room for some greater swings intraday on Tuesday, but overall I expect trading to remain on the light side and that we will find relatively few momentum movers given that the holiday will also mean very little news to drive anything. Many of the traders I spoke with Monday afternoon expressed their intentions to not even show up to trade and to begin their 4th of July holiday a day early since the U.S. markets will be closed for trading on Wednesday.

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.