Good morning! It was a choppy day in the market as the week kicked off. We saw both some slightly lower lows as well as a great deal of back and forth action to fall in lines with our expectations heading into the day. Initially the market gapped slightly higher into the SP500 and Dow Jones Ind. Ave.'s 15 minute 20 sma resistance. The Dow saw the most weakness from that point, trying to close the gap right away while the SP500 and NASDAQ both fell into choppy trading ranges for the first hour of the day. The Dow had already broken Friday's lows by the time the SP500 and NASDAQ succumbed to selling pressure around 10:30 ET.

The selling abated as the SP500 and NASDAQ came into prior lows and their 15 minute 200 sma support. At the same time, the range from last week also helped to stall the move. As the 10:45 ET reversal period hit, the market rounded off, creating a 2B on the 5 minute NASDAQ by putting in only a slightly lower low before picking up and heading higher into noon. The pace was much slower than the drop into the lows had been, but it was more than a 50% retracement off of the lows in both the SP and NASDAQ, making a trading range such as a triangle much more likely than a new low on a pivot.

The pivot came shortly after noon, pulling the indices into their 5 minute 20 sma support where they based on light volume before giving way to selling and taking the market once more towards prior lows. Again the pace was not extreme and the range held, reversing slowly into 14:00 ET before picking up strongly out of the reversal period and a very slight Phoenix in the form of a Cup with Handle in the Dow and SP. The market quickly ran back to prior highs, making a slightly higher high on the day in both the SP500 and the NASDAQ, but the 5 minute 200 sma helped to hold in the SP500. As that hit at the 14:30 ET reversal period the market pivoted again off highs and begin to decline into its 5 minute 20 sma support.

Initially I had expected a more gradual reaction to this resistance than we saw. The upside had been so strong, that it seemed a Bull Flag on the 5 minute charts would be possible initially, but since the pace on the downside was similar to mid-day action, instead of hugging the resistance, it became more probable that in order to see new highs on the day we would first have to have another triangle on this smaller time frame. When the support hit at the 5 minute 20 sma, however, the reaction was not very strong. Instead of bouncing off the support, it held the moving average, hugging it into the last reversal period of the day at 15:30 ET and creating an Avalanche setup on the 5 minute charts. The NASDAQ had pulled up slightly more off the support than the SP500 and Dow. As a result, it stalled initially again at the lows of that 5 minute range before it gave way to selling along with the weaker SP500 and Dow.

Up to the point that the Avalanche short pattern followed through well, I was hoping for the market to hold the 15 minute 20 sma zone in order to create a 30 minute Cup with Handle going into Tuesday and giving me a better bias to lead me in the morning. The increase in the downside pace in the last few minutes of the day instead means greater odds of further selling since the pace within the range on the 60 minute charts is stronger on the downside with the most recent development. I would like to see a more gradual upside move on the 5-15 minute charts towards the lower end of this range to give a better sell signal though, given that the market is currently back at the support from the prior lows.

Updates: VAR from last the 20th $38 around hit new highs the 27th at $40.70 before closing on the day with a base at highs ahead of earnings for swingtraders. For a larger position trade the weekly is still looking nice and I want the 20 week sma to hold as support. I will also continue to watch NEW for an upside breakout on the daily charts.

Economic Reports and Events
Aug 02: Personal Income for Jun (8:30 am), Personal Spending for Jun (8:30 am), Factory Orders for Jun (10:00 am), Auto Sales for July (12:00 am), Truck Sales for July (12:00 am)
Aug 03: ISM Services for Jul (10:00 am)
Aug 04: Initial Claims 07/30 (8:30 am)
Aug 05: Average Workweek for Jul (8:30 am), Hourly Earnings for Jul (8:30 am), Nonfarm Payrolls for Jul (8:30 am), Unemployment Rate for Jul (8:30 am), Consumer Credit for Jun (3:00 pm)
Aug 08: -
Aug 09: Productivity-Prel for Q2 (8:30 am), Wholesale Inventories for Jun (10:00 am), FOMC policy announcement (2:15 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Aug 01: BRKS (A), CECO (?), ETR (B), EOP (A), GPRO (A), GGP (?), HUM (05:00 am ET), LNC (A), MVSN (A), MMC (?), MXIM (A), OIS (A), PEG (B), SBAC (A), PFG (A), TWTC (A), UCL (?)
Aug 02: CTAC (A), AOC (A), AUO (8:00 pm ET), BMC (A), BORL (?), CDIS (A), CEPH (A), CHTR (B), COH (B), CMCSA (?), CVH (B), CCI (A), EMR (?), INCY (?), IACI (B), MAS (?), MBI (?), NTES (9:00 pm ET), PXD (B), PPL (B), PRTL (A), PDLI (A), KWK (A), Q (B), RNWK (?), RDC (B), SRE (?), SIRI /B(, SBL (?), THC (?), RIG (B), TXU (?), TYC (B), UNTD (A), UNM (A), UTSI (A), VPHM (A), VSH (?)

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.