Tuesday's trade left the market with a bullish bias into Wednesday morning. With the first-quarter earnings season now fully underway, however, the bias from the previous afternoon does not always follow through well into the next day. This time, however, earnings assisted this bias. Boeing Co. (BA) led the Dow's gainers after it reported a 38% profit increase. It gained 4.49% on the day. Broadcom (BRCM) was another major winner on Wednesday, adding 16.3% following its first-quarter results Tuesday afternoon.

The session began on Wednesday with another modest gap. This time it was on the upside. The open took place at price resistance from the late-morning congestion on Tuesday. This resistance held and the gap began to close. The S&P 500 ($SPX) and Dow Jones Ind. Ave. ($DJI) both closed their morning gaps rather quickly. The Nasdaq Composite ($COMPX), while it also fell out of the open, did not quite fill the gap completely, but it made an honorable attempt.

The S&Ps and Dow found support about 20 minutes into the day at the 5-minute and 15-minute 20-period simple moving averages. Prices rounded off at this support over the next 20-30 minutes. 5-minute bull flags triggered in the S&Ps and Dow out of the 10:15 ET correction period, while the Nasdaq triggered a two-wave continuation pattern in the form of a small cup-with-handle on the 2-5 minute time frames. This continued the upside bias that the market had in play heading into the day and the indices rallied steadily higher to close Tuesday's morning gap.

The morning rally took the Nasdaq back to its highs on the daily time frame which we had been targeting as resistance. The S&Ps and Dow did not quite make it back to Friday's targeted highs, however. After closing the gap around 11:45 ET, the market began to pull back. The momentum shift was enough on the smaller time frames to create a larger reversal. It confirmed when the indices formed a 5-minute Avalanche pattern between 11:30 and 12:00 ET and triggered into the 12:00 ET correction period with swift and decisive downside follow through.

The mid-day descent continued without interruption for more than half an hour. The momentum was some of the strongest we have seen on the downside in several weeks, but the volume was not substantial. The degree of the selling was still enough to take the market back to the area of the morning lows. The S&Ps surpassed them with a strong flush, but the Nasdaq slowed as it came into the early morning congestion and its 15-minute 20 sma and 5-minute 200 sma support.

The remainder of the session on Wednesday was quite choppy. The S&Ps and Dow hugged the lower end of their 15-minute 20 smas, while the Nasdaq hugged the upper end of its own. All three indices crept higher along the 5-minute 20-period sma, weaving back and forth, above and below it, into the close. This made afternoon trading in the indices themselves difficult throughout the majority of the afternoon.

The Dow closed higher on Wednesday by 42.99 points, or 0.3%, and 12,763.22. 18 of its 30 components were positive. The S&P 500 also gained 0.3%, or 3.99 points. It closed at 1,379.93. The Nasdaq Composite rallied 1.2% (28.27 points). It closed at 2,405.21.

The slow ascent throughout the afternoon made it easy for the indices to fall apart immediately in afterhours trade. The index futures on all three of the indices dropped to the zone of the session's lows before finding support around 21:00 ET. They were then able to turn over coming off that support and gained ground throughout the early morning hours on Thursday. With things where they stand now, the S&Ps and Dow are still within grasp of a retest of those Friday highs, however, it would not take much of a momentum shift for the correction off those highs to accelerate as they did several weeks ago.

Some of the names to watch out for on Thursday are as follows. Apple (AAPL) and Amazon (AMZN) both posted quarterly earnings on Wednesday after the close. AAPL forecast Q3 earnings of $1/share, which was under estimates, as were its quarterly sales expectations. AMZN's net earnings rose 30%, or 34 cents a share as compared to the 33 cent/share estimate. Its revenue also came in slightly ahead of expectations. Both stocks should be more active on Thursday following this data.

A number of companies will also be reporting ahead of the open on Thursday and are likely to experience strong intraday reactions. 3M Co. (MMM) is forecast to report a $1.36/share profit. ConocoPhillips (COP) is anticipated to report a $2.40/share profit. Dow Chemicals (DOW) is expecting a profit of 94 cents/share. For other earnings to come, please check the list below.

Dow Jones Industrial Average ($DJI)


S&P 500 ($SPX)


Nasdaq Composite ($COMPX)


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.