After a strong showing on Monday, the indices continued to pull back after reversing off highs Monday afternoon. This created the larger intraday correction we were looking for in the morning due to the slowdown in the buying the previous afternoon and intraday trend extension. It was another choppy day, however, and the market displayed quite a bit of overlap in prices from one bar to the next on the 5 and 15 minute time frames.

Following the open on Tuesday, the market immediately began to selloff. At 10:00 ET it popped a bit following August's pending home sales data. Pending home sales are down 22% in just the last 6 months. 6.5% of the decline was in August alone. Those of us in the south were hit the hardest with a decline of 9.5% in August whereas those in the west only experienced a 2.7% decline. As we saw with the last housing data though, the market pretty much expects bad news on the housing front and had no immediate negative reaction. In fact, the indices nearly made it back to the morning highs before turning around again with the 10:15 ET reversal period and heading lower once again.



The indices first showed signs of support at the 10:45 ET reversal period, but they managed one more flush into about 11:10 ET before they finally bounced. The Nasdaq was again the strength leader and pulled back up into earlier morning congestion rather quickly. All three of the major indices rebounded nicely though. At 11:30 ET they began to congest along the 5 minute 20 period simple moving averages. They showed signed of strength initially, but eventually gave way to further selling at 12:30 ET. The Dow, which had underperformed throughout the session, fell to new lows on the day very quickly. The S&Ps took a bit longer but still also made new intraday lows. The Nasdaq, however, held them and didn't even quite make it back to the lows at all.



The markets parted ways for a bit into the early afternoon. While the Nasdaq climbed steadily, the S&Ps attempted to do the same, but the Dow held lows for another base and eventually broke once more to new lows into 13:30 ET. The S&Ps also put in a very slightly lower low at this time, but all it did was flush out bulls and trap a few bears because the break was superficial and the market turned quickly back up into the range. The Dow even broke higher, clearing the downtrend line that had been in place since the early morning. All three indices held this third low and spent the rest of the day trying to move higher.



The Nasdaq made the most progress in the afternoon. The indices exhausted themselves a bit just prior to 15:00 ET, but the pullback was slower than the overall rally and took place with a lot of overlap and choppy trading, which is favorable for the bulls. The market turned higher again when the 15:30 ET reversal period hit. It continued higher until just prior to the close, but pulled back into the bell, continuing into the afterhours market.

When the closing bell rang, the Dow Jones Ind. Ave. ($DJI) was down 40.24 points (-0.3%) and closed at 13,047.3. Ford Motor Co. (F) was among the leaders, gaining 4.1% on Tuesday. General Motors Corp. (GM) also moved higher, gaining 2.8% on the day after posting a slight increase in September sales. The S&P 500 was relatively unchanged when the session ended. It lost a mere 0.41 point and closed at 1,546.63. The Nasdaq Composite rose 6.12 points. It closed at 2,727.11. Compared to the average of the past two months, the volume on Tuesday was rather light.

The markets still seem rather uncertain heading into Wednesday. The Dow is looking lower, but the Nasdaq has some decent support still at these levels and can still more easily push to new highs on the day. It will likely be another one of those days where it will be best to not push too hard. Nearly all of my best positions this past week or so have been in individual stocks since the market has some nice pockets of strength and has been giving us some very strong setups in things such as Wuxi Pharmatech Cayman Inc. (WX) from yesterday where the stocks have been breaking out of nice 4-7 day pullbacks into support on the daily time frames and then following through into the next day. Kookmin (KB) on Monday was another great example.

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.