I hope you had a good week last week despite the slower than average trading where each day the volume came in at a bit less than half of the average day from the previous week. Even with lighter than average volume, the session saw some major stand-outs. There has been a lot of excitement this week with buyouts, mergers, and rumors thereof creating some nice moves. Among the top names on Friday were CME, BOT, M, and TGT. The Chicago Mercantile Exchange Holdings (CME) raised its offer for the 3rd time for CBOT Holdings (BOT) to $11 billion. Macy's (M) shares also climbed in the session, moving higher by 5.6% on buyout rumors. Then there is Target (TGT). It's stock rose 6.1% on Friday over speculation that increased pressure by a major stock holder will lead the company to shed its credit card business.



In addition to the buyout news, gold and mining stocks also saw some nice moves. Newmont Mining Corp. (NEM) and Anglogold Ashanti Ltd. (AU) in particular performed extremely well. Other top movers were Raymond James Financial Inc. (RJF), American Capital Strategies (ACAS), Baidu (BIDU), Apollo Group (APOL), Infosys Tech. (INFY), and Cognizant Tech. Solutions (CTSH).

Not every sector and stock kept up with the overall market. Utilities, estate investment trusts, and biotechs all lost ground. Among the stocks which were hardest hit were Parametric Technology Corp. (PMTC) due to significant losses in licensing revenue, Genzyme Corp. (GENZ) thanks to poor trial results for its drug tolevamer, Healthway Inc. (HWAY) on news of a pilot program with the Medicare system, and Host Hotels & Resorts Inc. (HST) which gave up some of its previous day's extreme gains made in sympathy with the Hilton (HLT) buyout news.



After a strong intraday trend move into Thursday's close throughout the afternoon, the market was a little bit exhausted at the beginning of the trading day on Friday thanks to three small upside moves on the 5 minute charts. This small uptrend broke lower right away into the opening bell with a modest retracement in the first 15 minutes of the day. At the 9:45 ET reversal period the momentum slowed and the indices rounded off at support at the 15 minute 20 simple moving average intraday, price support from the previous session, and the Dow's 5 minute 200 sma. Small 2B patterns on the 1 minute charts soon turned things back around. As I mentioned in the morning commentary, the overall bias remained more on the bullish side and at 10:00 ET the bulls once again took the lead coming out of this minor reversal pattern.



Although the initial buying in the indices was rather strong, there was little change in volume as compared to the downside and once the market retook the previous day's highs the enthusiasm began to wane. A short base along the highs followed, while volume continued to decline. A third test of highs on the 1 minute time frame within this base led to a second wave of buying on the 5 minute charts, but the market barely even came into the equal move zone as compared to the first move higher before it began to correct once again.

On this second correction off higher following the 10:00 reversal, the market pulled into the 5 minute 20 sma support zone. Instead of bouncing back up into the highs as they had at 10:45 ET, the market instead just slid higher along the support on very light volume. This created a 5 minute Avalanche pattern which gave way to a nice scalp setups as a short out of noon.

Often corrections will come in two waves before a trend resumes but while this was true on Friday as well, the pivot off the second low was accompanied by a continuation of the light trading as well as lighter momentum. This opened the door for the potential of a 15 minute Avalanche, but the trend placement on the larger time frames suggested that the indices could very easily just creep higher off the 15 minute 20 simple moving average throughout most of the afternoon. This confirmed when the second small bounce off mid-day lows at 13:00 broke higher into 14:00 on slightly higher volume.

The main concern with this type of trend move is that it can reverse quickly if the trend just continues to climb with a great deal of overlap in prices from bar to bar on the 5 and 15 minute charts. In order to catch the move once it's underway a trader must enter on very minor corrections into the lower trend channel.

The best guess for a target on such an entry is just the upper end of the trend channel, although if the trend is fairly new there is of course the potential for more. If the security or index cannot seem to let go of the lower trend channel line, however, then watch out, since a breakdown is typically pending. This was the case on Friday going into the last 30 minutes of trading when the 15:30 ET reversal period hit and traders offset positions going into the weekend. Both the Dow and the S&Ps were back at their 15 minute 20 sma support within a mere 15 minutes of trading, taking back an hour's worth of gains in a matter of minutes.

The week ended with a gain of 1.8% in the Dow ($DJI), rising 45.84 points on Friday to end the day at 13,611.68. The S&P 500 ($SPX) rose 1.8% for the week, adding 5.04 points on Friday to close at 1,530.44. The Nasdaq Composite ($COMPX) had the largest weekly percentage gain of 2.4%, closing at 2,666.51 with a gain on Friday of 9.86 points.

Heading into Monday and the onset of earnings season, the market remains bullish. The highs from the middle of the month last month in the Dow and S&Ps will serve as resistance. Currently the momentum continues to cause added concern for sharp 15 minute corrections off the highs. Some of the major names with the potential to move the market this week on earnings include AA, GE, YUM, PBG, MAR, MTB and DNA.

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.