The market has fallen into a decent corrective stage on the daily time frame as the week begins. The indices whipped strongly back and forth at the end of last week, and then reversed a third time on Monday after rounding off at all session highs heading into the day to trigger a short almost immediately following the open despite a minor gap higher. This went contrary to what I had been expecting the previous evening since I was originally looking for strength into the morning and had to change my bias rather quickly. The Nasdaq held up the best to begin with, finding support at the 5-minute 20 simple moving average while the Dow Jones Ind. Ave. and S&P 500 dropped right through them, but after congesting along the support for about half an hour the indices had all formed Avalanche continuation patterns and the next level of support gave way to further selling.



The downside move out of about 10:30 ET was the strongest move of the day on Monday. Selling continued until the Dow and the S&Ps had both made their way back into Thursday's afternoon lows. This served as support initially, but the momentum into the support level was too strong to allow the indices to rapidly retrace. Instead they fell into trading ranges along the support and volume dried up as the 5-minute 20 sma approached. This previous support level now served as resistance and the indices broke down again into 12:30 ET. The market moved to lower lows but did not break by as much as the previous selloff.



Soon after 13:00 ET the market bounced again. This time the momentum was a bit stronger, but the 5-minute 20 sma remained resistance. It was the beginning of a momentum change, however, and the indices continued to round off at lows with only slightly lower lows before popping higher into the close in the final 30 minutes of trading on a 15-minute momentum reversal pattern. The upside took the market through the 15-minute 20 sma resistance, but it was not enough to hold off the bears in afterhours trading and selling resumed to kick off Tuesday's premarket trading at mid-night.



Monday's session ended with a loss of 108.28 points in the Dow ($DJI) for a closing price of 13,984.80. The S&P 500 ($SPX) lost 13.09 points and closed at 1,548.71. The Nasdaq Composite ($COMPX) lost 0.01% more than each of the other two indices, falling 25.63 points and closing at 2,780.05. Oil-related stocks were among the strongest, while General Motors (GM) was one of the weakest. I had expected Monday's closing prices to be followed by a lot more upside than occurred. I think it is still possible that this can come in for the morning, however, and my bias is again bullish in the morning, but the prior highs from Thursday remain very strong resistance.

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.