While the Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), Nasdaq Composite ($COMPX), and Russell 2000 ($RUT) all turned and held intraday support and resistance levels at the same time throughout Wednesday's session, the strong difference between the gainers in the Nasdaq and the losers in the Dow returned. This is similar to what happened in Monday's session, right down to the morning selling and late day reversal off lows.

By the end of the session the Dow had shed 86.8 points and closed at 14, 078.7. The S&P 500 was less committed either way and lost only 2.68 points. It ended the session at 1,562.47. The Russell 2k had the least change, falling 0.53 point to end at 845.19. The Nasdaq Composite, on the other had, posted a modest gain of 7.70 points. It closed at 2,811.61.



I missed out on most of the trading day, but overall there was quite a bit of chop, with the exception taking place mid-day. There were still some decent triggers, however, to offer nice trading ops, but the stakes were higher since the added choppiness meant larger potential stops compared to the potential gains.

Following the open, the market headed lower. This smaller 1 minute trend continued into the 10:15 ET reversal period. The reversal period combined nicely with the 15-minute 20 simple moving average support and price support from the prior session to allow the selling to come to a halt and a decent reversal trigger to form.

The Nasdaq quickly moved to new intraday highs, while the Dow barely budged. A second pullback into the 11:00 ET reversal period faired a bit better. A third intraday high was made in the Nasdaq, taking it back to Tuesday's highs, and the S&P 500 retested its morning highs. Slower momentum into these resistance levels and lighter volume on the buying then allowed the indices to roll over and fall into the 12:00 ET reversal period.



The decline into noon was the strongest downside action of the day up until that point. This continued shift in momentum was followed by a slower correction off the support at the previous intraday lows in the S&Ps and Nasdaq and prior morning's lows in the Dow. This correction continued to move higher into the 13:00 ET reversal period and the 5-minute 20 simple moving average, but it did on on weak volume, indicating a lack of eager participants in the upside move. A second wave of selling hit quickly out of the reversal period and off the resistance, taking the market into a second afternoon low at 13:30 ET, which is yet another reversal period.

The break in the trend channel of this second decline gave a nice buy trigger, but I had expected initially that it would only be a scalp trade into the 5-minute 20 sma again. The Nasdaq was forming three highs on the 60-minute charts and creating the risk of a larger correction, at least in the form of a lower trend line break. This meant that a bear flag was possible into 14:30 ET. As this next correction off lows developed, however, the momentum increased on the upside and even though the indices flushed quickly off the 5-minute 20 sma, it busted through that level going into 14:30 ET. The main trend of the day was now well underway.



This last major move of the session was not a pretty one for weak hands. The trend continued nicely until the last 30-40 minutes of the day, but the channel was rather wide with a great deal of overlap from one bar to the next on the 5-minute time frame. The best course of action in such a situation is to draw a lower trend channel line and when it breaks, look to get out, paying particular attention to the larger time frame resistance levels. In this case it was the previous afternoon's highs in the S&Ps and the morning lows in the Dow coming together at the same time. The risk, of course, is that since the channel is wide, you do end up giving a nice chunk of your gains if you are wrong. After holding the resistance at highs, the indices then corrected off the highs into the close, but did not get far and held up well into the wee hours of the next morning.

I am once again very cautious on upside action. I think the market is at a point now that a larger correction for a few days at least is imminent, but since the move did not take place on Wednesday, and the buying into the afternoon was still strong, it may take another day or so to turn over. At this point, however, I would not suggest being aggressive on the upside other than in daytrades, since the slowing momentum on the 60-minute charts into each new high opens the door for rapid downside flushes on the 15-minute time frame.

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.