Although the holiday week is behind us and we are heading into earnings season, volume remained light on Monday. This continues a string of slower than average Mondays in the overall market which was primarily range-bound throughout the session. By the end of the day the Dow Jones Industrial Average ($DJI) had risen 38.29 points. It was the leader in the relative strength department, but still only gained 0.3%. The S&P 500 ($SPX) climbed a mere 1.41 points. The Nasdaq Composite ($COMPX) also had only a slight gain with 3.51 points. Both of these were only an increase of about 0.1%.

I have a presentation coming up this weekend in Denver sponsored by the CBOT, so a lot of my trading since I returned from vacation has been focused on the EMinis in order to use them for examples. While I've done well, a focus on individual stocks would have served me better, since a lot of individual stocks on Monday really outperformed the market as a whole.

Leading the Dow on its steady journey were some of the most recognized names in the market. Alcoa Inc. (AA), which is always one of the first to announce earnings and which was due out after the closing bell, led the way with an increase of 1.7% (+$0.70) on Monday. Incidentally, it later reported that while net income fell 3.9% last quarter, revenue rose 3.4%. This was somewhat short of expectations and AA did end up moving lower by about 1% in afterhours trading.

Boeing Co. (BA) also moved strongly higher in Monday's session on news, but while AA climbed throughout the day, BA's gains came in the form of a strong upside gap smack into price resistance at the year's highs. BA had hit $101.45 just over a month ago and it retested that zone with a high shortly after the open of $101.32. It had been moving higher over the course of the past two weeks after a nice two-wave pullback off those earlier yearly highs. On Sunday the company then announced that it had orders for 35 of its new 787 Dreamliner commercial jet that made its debut on Monday. The first deliveries are slated for 2008 with the 787 seating between 210-150 passengers. One of the highlights is that it is anticipated to use up to 20% less fuel per passenger than other planes of a similar size.

The other top Dow movers were American Express Co. (AXP) at +1.5%, Caterpillar Inc. (CAT) at +1.3%, Intel Corp. (INTC) at +1.1%, Exxon Mobil Corp. (XOM) at +1.1%, and General Motors (GM) with a gain of +0.8%.

Johnson & Johnson (JNJ), another Dow component, rose 0.9% on news of a share repurchase program. While not in the Dow, ConocoPhillips (COP) also made headlines intraday when it surged at 2:30 ET on news that it planned to buy back up to $15 billion of its shares through the end of 2008. One attraction of these buybacks is that since they reduce the number of shares outstanding in a stock, they will tend to give per-share earnings a nice boost. Buybacks in the S&P 500 hit a record monetary level in the first quarter of this year of $117.1 billion. This is a 17.5% increase as compared to the same period last year.

Even though Nasdaq as a whole did not make many waves on Monday, some of the largest gainers in the overall market were not in the Dow, nor the S&P 500, but rather the Nasdaq. Among the strongest intraday movers were Taser Intl. Inc. (TASR), Amazon (AMZN), Sandisk Corp. (SNDK), Crocs Inc. (CROX), First Solar Inc. (FSLR), Isis Pharmaceuticals Inc (ISIS), JA Solar Hldgs (JASO), and my favorite stock of the year... Schnitzer Stl. Inds. (SCHN). Each of these had at least a very strong morning, and the majority had a very nice trend day on Monday. The one that I was lucky enough to catch the nicest move in was JASO.



Despite some really great moves in equities, the overall market was not terribly exciting. A slight gap higher was followed by a couple of small pivots back and forth in the first hour of trading. The Dow and S&Ps had ran into the previous highs, which we had been watching for resistance, and the rally from the previous afternoon served to exhaust the buying even though the market made a second attempt at highs into the 10:15 ET reversal period intraday after a somewhat faster drop out of 9:45 ET. Volume was lighter on the second bout of intraday buying on the 5 minute time frame though, and shortly after 10:30 ET the downside momentum increased, leading to new intraday lows and about a 50% retracement of the previous day's range in the Nasdaq and S&P 500.



The price retracement and support, combined with the Dow's 15 minute 20 sma support and an increase in volume exhausted the sellers into 10:45 ET. I picked up the NQ (Nasdaq EMini) at 2003.25 at 10:46 ET for a pivot trade. The momentum was also slowing and rounding off at lows in the Dow at the same time. I choose to buy the NQ first because it showed the greatest exhaustion. I added the YM (Mini-Dow) soon thereafter at 10:55 ET. I had to hold through a very slight flush of a few points, but the rounding off continued and the 11:00 ET reversal period held the Dow as it completed its closure of its morning gap and soon the three major indices were all heading higher.

The late morning bounce began quickly enough, moving nicely into the 5 minute 20 sma, but after taking back about half the earlier losses they ran into trouble. The daily charts were still very extended and the morning decline was simply too strong to sustain decent upside momentum on Monday. While I continued to favor the bulls, trading became very sloppy in the indices and it was necessary to just hold on and trust my bias since there were very few "pattern" setups throughout the remainder of the day. The uptrend channel on the 5 minute broke lower for about 30 minutes at 2:00 ET, but soon reversed back to the upside and was retesting the morning highs by the 3:00 ET reversal period. The sloppy action then returned for the final hour of trading with the 15 minute 20 sma serving as support.



Although we don't really have any reversal pattern triggering at this point on the larger intraday and daily time frames, the upside momentum has me concerned because the types of declines we experienced mid-morning on Monday are very common with this type of buying. It simply does not take much for the bears to grab hold. I am not going to be very aggressive on the short side just yet though, and will likely treat those setups that I do come across intraday more as daytrades than swings. Exceptions would be setups such as Panera Bread (PNRA) on 6/6 and Genzyme Corp. (GENZ) on 7/6. These types of gaps tend to have continued selling and are nice for swings when you catch them early on.



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.