Good day! The indices fell apart on Thursday following a strong intraday technical short setup with a 15 minute Avalanche in the S&P 500 and Dow Jones Ind. Ave. and a channel break in the Nasdaq, along with news of an unexpected increase in jobless claims. That weakness continued into Friday as well. The indices did manage to find some initial support at the 10:15 ET correction period. A light volume surge back to the morning highs took place within a mere 15 minutes, but that price resistance, along with the 15 minute 20 period simple moving averages, was enough to keep the bulls in check. The markets rolled over off those highs, first stalling at the 5 minute 20 sma support, and then returning to morning lows. A trading range followed with volume dropping once again into the early afternoon.

The reverse-"V" formation at 10:30 ET highs, followed by a base along morning lows, created a two-wave continuation pattern favoring the bears coming out of 13:00 ET. The light volume throughout that base helped confirm this bias, because upside action off the support received less interest than the previous selling. In this case, that meant that the bears still retained control, while the bulls waited on the sidelines. The selling resumed shortly after the 13:00 ET correction period and continued strongly into the 14:00 ET correction period.

14:00 ET is a typical time period intraday for trend moves on 5 and 15 minute charts to come to an end. Reversals and trading ranges often begin at this time. The afternoon selloff had also lasted approximately as long as the selloff from 10:30 ET highs, creating another form of exhaustion. Because the afternoon descent was so steep, however, with the Dow hitting triple digit losses, the indices had a more difficult time maintaining a sharp reversal off the 14:00 ET lows. The 5 minute 20 sma held initially as resistance and the markets congested along this resistance zone into the 15:00 ET correction period.

When the indices rallied into the 5 minute 20 sma from 14:00 into 14:30 ET, they could have easily reacted to that resistance level by pulling lower to lead to another two-wave continuation move on the downside. By hugging the 5 minute 20 sma instead, they managed to shift the momentum of the price action on that time frame. When the 5 minute 20 sma broke higher, it triggered a buy setup on that time frame. The change in momentum helped the indices reverse quickly. By 15:15 ET the indices were once again testing the zone of the morning highs. They held this level into the closing bell and ended the session with token gains.

Information technology and materials were the two strongest sectors on Friday. Both finished the session higher by 1%. They had been among the worst-performers recently. The worst groups on Friday, however, were health care, utilities, and financials services. All three fell by approximately 2%.

The Dow Jones Industrial Average ($DJI) ended the session on Friday at 10,012.23 with a gain of 10.05 points, or 0.10%. The index overall was down 0.55% for the week and 3.99% YTD. On Friday, Intel (INTC) was the best-performer in the Dow, rising 2.37%. It was followed by a gain of 2.33% in Cisco (CSCO). Alcoa (AA) rose 2.09%. The top decliners were General Electric (GE) with a loss of 1.56%, Boeing (BA) with a loss of 1.55%, and McDonalds (MCD) with a loss of 1.08%.

The S&P 500 ($SPX) rose 3.08 points, or 0.29%, and closed at 1,066.19. The index ended the week lower by 0.72% and is down 4.39% YTD. Airgas Inc. (ARG) led the S&P 500's gainers after it spiked higher by 40.04% on Friday following an acquisition offer by competitor Air Products & Chemicals at a 38% premium over Thursday's close. After falling sharply on Thursday, MEMC Electr. Materials (WFR) was the second-best performer with a gain of 7.67%. Other top gainers were Newmont Mining (NEM) (+6.18%) and Broadcom (BRCM) (+6.06%). Losers outpaced the winners by 283 to 147, with little change in the remaining index components, despite the slight gains in the overall index. Air Products and Chemicals (APD) was the day's biggest loser in the S&P 500 (-6.85%).

The Nasdaq Composite ($COMPX) rose 15.69 points, or 0.74%, and it closed at 2,141.12 on Friday. The Nasdaq was down 0.29% for the week and is down 5.64% YTD. BRCM was the Nasdaq-100's biggest gainer on Friday. It was followed by Applied Materials (AMAT) (+3.64%) and LAM Research (LRCX) (+3.22%). It's biggest losers were Foster Wheeler (FWLT) (-6.04%) and Illumina (ILMN) (-3.11%).

In other markets, crude oil futures fell under $70 a barrel before ended the week at $71.19 a barrel, while gold hit a 3-month low and settled at $1,052.80. The dollar also resumed its climb and hit its highest level against the euro since last May.

The markets have room to push higher again into Monday morning, but the zone from Thursday's highs will serve as strong price resistance. Given the pace of the selling on Thursday, it will still be difficult to maintain a strong upside move on the 30 minutes time frame. My best guess is that the best the bulls can hope for right now is a trading range on the weekly time frame that would allow the pace of the daily momentum to shift and create a buy setup on the weekly charts. This can take several months to develop.

Key Economic Data This Week:

February 9, 2010
10:00 AM Wholesale Inventories Dec

February 10, 2010
8:30 AM Trade Balance Dec
10:30 AM Crude Inventories
2:00 PM Treasury Budget Jan

February 10, 2010
8:30 AM Continuing Claims 02/06
8:30 AM Initial Claims 02/06
8:30 AM Retail Sales Jan
8:30 AM Retail Sales ex-auto Jan
10:00 AM Business Inventories Dec

February 12, 2010
9:55 AM Mich Sentiment Feb

Key Earning Announcements This Week:

Monday, February 8, 2010
Before: AMRI (?), AGNC, BWP, CGA, CHDX, CNA, CPIX (?), CVS, GWR, HAS, HS, LFUS, L, LO, MCY, OMC (?), SIRO, VTNC, VOD
During: -
After: ADCT, ANDE, ATML, AXS, BWY, CPT, CIM (?), CMP, CPX (?), CCRT (?), CUTR, DGI (?), ERTS, ESLR, FWRD, HAR, HIG, HIMX, IPHS (?), LNCR, LNC, NUAN, OTTR, OMI, PKY, PIKE, PPS, PPDI, PFG, PSEC (?), QGEN (?), RENT, SKH, SWI, SRX, TMRK, TWTC, VECO, VMC, WRB, WCN, ZOLT

Tuesday, February 9, 2010
Before: ACM, AGCO, AGU, AHCI, ALLT, ANR, ATRO, BIIB, BJS, CAM, FUN (?), CE, CNC, CHD, KO, CTSH, CVH, CYNO, ENER, IT, GET, IACI, IFF, KVHI, LCAV, MLM, TAP, NURO (?), NOOF (?), NYX, PCH, PHM, RTIX, RBCN, TIN, GTS, VSH, WMG, ZBRA
During: -
After: ATAC, AGAM (?), AFG, AHL, BIDU, BOBE (?), CFN, CERN, CRK (?), EXBD, CXW, DIOD, DSCM, EM (?), EOG, GIL, HCSG (?), HNI, KFRC, LTRE, LGF, MAXY (?), NTGR, OPEN, PEET (?), QLTY (?), RNR, RUE (?), SB, TCO, UDR, ULTI, USNA, VCLK (?), DIS, WTS (?), WWWW, XL

Wednesday, February 10, 2010
Before: ABD, MT, CAE, CCE, CSC, DF, DISCA, ELN, FORR, ICE, JNY, ID, LNCE, LVLT, LPX, MMC, MXGL, MTOX, NURO, NYT, NWPX (?), OMC, PFCB (?), SNI, SIAL, SON, S, TLM, TGH, TDG, WXS, WYN
During: -
After: ATVI, ALL, AMKR, ATR, ARRS, BMR, BSX, CBM, STV, SCOR, SPA, CLB, CPII, CRAY, DVA, PROJ, XRAY, EGP, ELON, EDMC, WIRE (?), EQIX, RE, GLUU, GSIC, HGR, HIW, NSIT, KONA, LPSN, LFT, LOOP, MAS, MDSO (?), NSR, OSUR, PRE, PVA, PAA, PL, PRU, O, SWIR, TLEO, TMK, WATG

Thursday, February 11, 2010
Before: ASF, AKNS, ALU, ARE, ALXN, ARIA (?), AN, BWA, CATM, CAAS (?), CBB, ECL, EMS, ECA, NPO, EXPE, FLIR, GLT, GPI, HEP, HOS, RX (?), IPCC, IRC, JASO, JRN, KBW (?), LH, LF, LUFK, MAC, CLI, MAR, MNTA, NOVA, NRG (?), OZM, OHI (?), PMTI, PTI (?), PTEN, PEP. PGN, PLD, QCCO (?), QUIX (?), REV (?), SCG, SKYW, SNN (?), SF (?), STRA, ELOS, SYNT, TKLC, TDC, TOT (?), TRAD, THS, VFC, VIA.B, WWE
During: GRC (?), PM
After: ACL, AB, AWH, BEC, BJRI, BEC, BJRI, NILE, BELD, CEC (?), CEPH, CAKE, CPC (?), CMG, CHH, CGNX, CSTR, CML, DCT, EHTH, ENOC, EPIC, FARO (?), FFG, GDI, BGC, HNSN (?), HE, XXIA (?), LVS (?), MFE, MOH, NRP, PNRA, PTC, PNSN, PRAA, PRO, QDEL, RNWK, RSG, ROVI, SQNM (?), SONO, STMP, SHO (?), SMMX, SVR, KNOT (?), USTR, VARI (?), XNPT (?), ZGEN

Friday, February 12, 2010
Before: A, ALE, HCP, IR, MFA (?), PAS, UPL
During: DUK
After: -

Check out my BLOG for detailed comparisons of the current daily price development to similar occurrences of price development in the past.

Toni Hansen is a Market Analyst and Trader with www.tradingfrommainstreet.com. She can be reached at Toni@tradingfrommainstreet.com.