The market experienced a great deal of divergence on Tuesday. While each of the three major indices gapped lower into the open, the S&P 500 and Dow Jones Ins. Ave. experienced the largest gaps. The market opened into support from previous lows in the Nasdaq and the 15-minute 200 sma in the S&P 500. In the S&Ps and Dow the gap was significantly larger than average, which meant that typically that gap zone will attempt to fill and will nearly always do so in at least one of the three major indices.



By the time the 11:15 ET reversal period hit, the indices had all closed their gaps and had put in at least three waves of buying on the 5-minute time frame. A short setup triggered well after the third his to lead to a decent correction off the market's initial highs. After pulling back off the morning highs the indices formed their first upside continuation pattern after 12:30 ET and moved into highs following 13:00 ET.

The market struggled throughout the day to gain any real momentum. The Nasdaq faired the best and trend higher into the close, but the S&P 500 and Dow were stuck in a range nearly all day and failed to trigger strong setups on the 5-minute time frame. The Dow Jones Ind. Ave. formed an upside continuation pattern coming out of a cup with handle pattern around 14:30 ET, but the market did not seem terribly excited. The market still managed to close at intraday highs, but the action was one conducive to intraday shopping for work clothes.



When the closing bell rang the Dow was up 19.59 points and it closed at 13,778.7. Home Depot was again another strong decliner. The market ended on a strong note, however, and continued higher throughout the afterhours and into the early morning. The S&P 500 shed 0.52 point on Tuesday and closed at 2,683.45. The Nasdaq Comp. ($COMPX) ended its session higher by 15.50 points at 2,683.45.



The market range is likely to continue over the next couple of days. I am still rooting for a better test of the previous highs. I'm going to be out of the office throughout most of Wednesday though, so I am hoping that any strong activity in the market which serves as a break in this congestion will be kind enough to wait until I return on Thursday.

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.