The market managed another day of strong gains on Tuesday, but the session started out rocky. The indices gapped higher in the morning, but the gap was large enough that the initial buying took the ES (S&P 500 EMini) right into that 1570 level we had tagged as resistance earlier the previous evening. The absolute morning high was 1569.25. After hitting that level, however, the market needed a chance to rest and the gap soon began to quickly close coming off the 9:45 ET reversal period. The 5-minute 20 simple moving average and gap closure were the support levels on this same time frame. The 10:15 ET reversal period held for about 15 minutes, but then the market tested the support level more securely before pulling back higher into 11:00 ET.



After the market popped, the momentum began to shift, but unlike the previous day, the indices had been pretty much in sync all day and this remained true into the afternoon as well. The market fell into 11:45 ET when the 5-minute 20 sma stalled the selling. It congested along the moving average as volume declined to indicate a lack of motivated buyers. A nice sell setup triggered into 12:30 ET and took the S&Ps back into the zone of their morning lows. A second correction into the 5-minute 20 sma created the opportunity for a third mid-day decline. It triggered quickly and took the Nasdaq back into morning lows, whereas the S&Ps and Dow fell into negative territory.



By this time market participants were beginning to hedge their bets. The FOMC minutes were due out at 14:00 ET, but some eager players began to push higher ahead of the report. After it hit the S&Ps and Dow shot back into the intraday highs and the Nasdaq back into mid-day highs. A nice two-wave correction on the 1 minute time frame followed and formed an upside continuation pattern into 14:30 ET. The larger change of momentum helped the market then break to new intraday highs. This momentum continued nearly into the close. I got a short trigger on the NQ into 15:30 ET and that index flushed into the 5-minute 20 sma gain, but was not able to take the Dow and S&Ps with it.



By the closing bell, the Dow Jones Industrial Average ($DJI) had added 120.80 points (+0.9%) and it closed at 14,164.5. The S&P 500 ($SPX) rose 12.57 points (+0.8%). It closed at 1,565.15. The Nasdaq Composite was weaker thanks to the earlier extension from the previous day. It gained 16.54 points (+0.6%) and closed at 2,803.91. Alcoa (AA) helped by gaining 3.75%. This momentum still has room to continue into Wednesday morning. There is no strong exhaustion showing up at this point intraday, but resistance should hit early on in the morning. 1583 is the next 60-minute resistance zone.

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.