After a series of slow trading days, volume remained light on Thursday as market participants extended their holiday, but underneath it there was still quite a bit to take note of. Perhaps the most apparent was the action in hotels. This sector surged following the $26 billion deal Blackstone made for Hilton (HLT). It seems like all the major hotel stocks took off well before the open with monumental gains in HST, HOT, MAR, MGM, LHO and many more. Casinos and other investment property types of companies followed suit.

Despite the fact that most of the well-known hotel names are on the NYSE, it was the Nasdaq Composite that had the greatest relative strength. While the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) fell for a few minutes out of the open, the Nasdaq not only held up very well, opening above Tuesday's highs, but it was soon making new highs on the year. The divergence became even more pronounced as the day progressed. The three indices fell into a trading range throughout the morning, but the range narrowed in the S&Ps the most, forming a triangle on the 5 minute time frame before breaking lower on a third test of the lows of the triangle at about 10:45 ET. Both the Dow and Nasdaq returned to morning lows at this time and found support at the 11:00 ET reversal period. This also corresponded to the 5 minute 200 sma and 15 minute 20 simple moving average in the Nasdaq.



The Nasdaq retraced nearly all of its prior decline out of 11:00 ET, but the S&Ps and Dow only managed to regain about 50% of the losses. This was followed by another triangle on the 5 minute time frame and second breakdown into the early afternoon which took the S&Ps and Dow to new intraday lows. The Nasdaq continued to hold up very well, however, and could not break the lows of the day which hit again at the same time as the S&Ps came into price support from last Monday and the Dow came into price support as well as its 5 minute 200 sma at 12:30 ET. This completed three waves of selling on 5 minute time frame in the S&Ps and made it highly probable that the market would experience a more significant correction off support into the afternoon as compared to the earlier ones which lasted only about 75 minutes each.



Even though the S&Ps and Dow got off to a slower start, all three of the major indices did a fine job of holding the mid-day lows. Volume continued to drop into the afternoon, however, which was a bit of a concern as the indices tested resistance on the 5 minute charts at about 13:30 ET. It remained light on the pullback off those highs though and the slower pace combined with the 5 minute 20 sma support led to a nice upside continuation out of the 14:00 ET reversal period. The momentum actually increased on the upside coming out of this setup, and while the volume did increase, it still remained lighter than average as the Nasdaq soared once more to new highs.



After putting in an equal move and then some as compared to the 12:30 ET rally, the market again hit a snag. The S&Ps ran into the middle of the range from the morning as price support and the 5 minute 200 sma resistance. The Dow stalled at the previous highs from the morning and the Nasdaq EMini came into the zone of price resistance at 2000 (with a high of 1999). I went ahead and shorted the YM at 14:54 ET off a 1 minute 2T since it had the strongest resistance. As those of you who read will blog will note, I made a bit of an order entry mistake on my exit, but the pullback was decent, falling back to the 5 minute 20 sma before putting in a third and final 5 minute rally into the final 30 minutes of the day.

The Dow didn't quite manage to make back its earlier losses by the close. It fell 11.46 points (-0.1%) on Thursday to close at 13,565.84. The S&P 500 faired little better with a gain of a mere half a point, ending at 1,525.40. The Nasdaq ($COMPX) did pretty well though, gaining 11.70 points (+0.4%). Apple Inc. (AAPL) had a lot to do with it. It broke out sharply on Tuesday and continued with that momentum when trading resumed on Thursday.

Friday's trading is expected to again be light. The bias is still more on the bullish side, but not as strong as it was heading into Tuesday and Thursday. The three waves of buying on the 5 minute time frame will also make it easier to stall, so I'm not going into the day stuck on that mindset. Additionally, buying in a lot of stocks on Thursday was rather extreme and that type of momentum has a difficult time sustaining itself.

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.