The market continued to shrug off Friday's losses on Tuesday. Apple (AAPL) rose 6.8% on the day after reporting a 67% increase in last quarter's earnings, while Amazon (AMZN) rose 10.4% ahead of its own upcoming earnings report due out after the bell. Research in Motion (RIMM) also rose sharply, posting nearly a 10% gain after taking off sharply mid-day on news that it would be selling its BlackBerry wireless devices in China. American Express (AXP) was another winner, gaining 3.2% after reporting an 11% increase in Q3 profits.

By the closing bell on Tuesday, the Nasdaq Composite ($COMPX) had risen 45.33 points, or 1.7%, ending the session at 2,799. The S&P 500 ($SPX) came in second with a gain or 13.26 points, or 0.9%. It closed at 1,519. The Dow Jones Industrial Average ($DJI) had the smallest percentage gain of +0.8%, but still tacked on over 100 points (+109.26 to be exact.) It closed at 13,676.

While news has certainly helped push the Nasdaq higher, leading it to new 52-week highs on Tuesday, the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) have risen to a lesser degree and are in line with the typical price reaction following a move such as on Friday. In other words, we've seen some upside in those indices, but nothing nearly as extreme as the earlier selling. It would now be normal to see some retracement again on Wednesday and the indices had a strong sell signal intraday heading into Friday's close which played out afterhours to already assist with part of that corrective bias.



The day began on a strong note on Tuesday. The indices gapped higher into the open thanks to continued upside after Monday's closing bell and early morning buying. The gap was right into resistance, however, from the congestion zone mid-day on Friday. I was expecting it to pull up into the middle of that range before it reacted to it, hence the 1528 level I posted in the ES (EMini S&P 500) as resistance, but it only made it into the lower end of that zone. The market actually rounded off at premarket highs into that level, so my bias as a whole was to the downside in the first half of the day with my first short taking place ahead of the open at 1522.5. It took awhile, however, for the bears to really take hold. The market fell into a range out of the open and it was not until the third test of intraday lows on the 5-minute time frame that the selling finally began to take over. This corresponded to the 10:45 ET - 11:00 ET reversal zones.

The Dow and S&Ps led the sellers into mid-day. They barely paused at the support from the gap closure and continued into a very strong test of their 15-minute 20 simple moving averages. At 11:30 ET the selling slowed and at 11:33 ET I had my first buy setup of the day in the NQ (EMini Nasdaq 100). The Dow and S&Ps rallied strong into the 5-minute 20 sma into noon, while the Nasdaq moved all the way back into the prior breakdown price level before stalling.



The market became very choppy once again into the early afternoon as volume dropped off a great deal. The indices crept higher until 14:00 ET. At that point the RIMM news hit. Since by this point the market had held the support for too long to favor a strong break lower, the bulls were given the freedom to rally once again. The S&Ps and Dow quickly moved back into the morning highs, while the Nasdaq was soon retesting last week's highs. The Nasdaq hugged those highs while the S&Ps and Dow pulled back off 14:30 ET. When the last reversal period of the day hit at 15:30 ET it pushed the Nasdaq to new yearly highs and took the S&Ps and Dow to new intraday highs. The market was rounding off on the smaller time frames into the close, however, and, as I mentioned earlier, the sellers again took over afterhours.



NEWS: Due to time constraints, I will not be publishing my Daily Market Action Letter from Thursday through Tuesday, but will return with it again next Wednesday.

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.