It was a bit of a tougher day out there in the markets on Thursday. Volume remained on the lighter side and the market spent a large chunk of the day stuck chopping back and forth. The best activity came in the morning. The indices had gapped slightly higher out of the open, but this gap took them smack into resistance from previous highs and congestion levels as well as the 5 minute 200 simple moving average resistance intraday. Although there was a bit of hesitation initially, the market quickly turned over and began to sell off.

The morning gap filled fairly quickly, but the indices barely paused before it continued lower. The Nasdaq Composite and S&P 500 both fell into the zone of the previous day's lows, while the stronger Dow Jones Ind. Ave. came into its previous 15 minute lows before the selling finally abated. This roughly corresponded to the 10:15 ET reversal period. My only futures trade for the day came just a couple of minutes later at 10:23 ET.



This market moved very well off this early morning pivot. The indices stalled somewhat going into 11:00 ET, but a second wave of buying on the 5 minute time frame triggered at 11:15 ET and this took the Dow and S&Ps both to new intraday highs and brought the Nasdaq into its opening prices. This resistance stalled the rally for a second time, but the third and final move of the trend did not take long to develop.

Soon after 12:00 ET the Dow and S&Ps were again making new highs. This final push took the Nasdaq back into its morning price resistance at the opening highs and its 5-minute 200 sma. This resistance corresponded to the zone of Wednesday's highs in the Dow and S&Ps, so once again, even though the types of resistance were not the same, all three indices nevertheless ran into a price ceiling at the same time.



While most trend moves in the market consist of three waves of buying or selling, corrective moves are notorious for taking only two. One of my favorite strategies in the market is to buy a two-wave pullback when the larger time frames are strong. This time around, however, while the market did still conform to this bias, the pullback was a bit on the more sloppy side. All three indices did have two waves of selling on the 5 minute time frame, but the price spike in between them was a bit stronger than usual in both the Nasdaq and S&P 500, so the continuation caught me a bit off guard even though it triggered out of the 13:00 ET reversal period.

The second wave of selling on the early afternoon correction brought the indices back into their 15-minute 20 sma support levels. This was also price support from earlier intraday congestion. The market rounded off a bit at this support, but not enough to trigger strong buying. Instead the indices just crept higher into the close with a great deal of chop. I found it incredibly difficult to settle on a bias and ended up not trading the final two hours of the day for fear that I would just get chopped up in the mess.



I was leaning a bit more to the bearish side going into the last hour of trading, but the congestion really should have broken lower around 15:00 ET. Instead the market held the lower trend channel that had been in place since about 13:15 ET. The Dow ($DJI) ended the session with a gain of 57.88 points, while the S&P 500 gained 6.26 points, and the Nasdaq Comp. rose 8.37 points. This ugly close still had me a bit more bearish into the end of the day, but only on about a 5 minute time frame, so that follow though can easily work itself out afterhours. The creeping move higher, however, is more often resolved with an increase in upside momentum, so it would not surprise me if the Nasdaq makes that push for July's highs.

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.