The roller coaster ride of the past several trading days continued on Tuesday, but the market overall managed to close with some solid gains. The Dow Jones Industrial Average ($DJI) added 117.54 points (+0.9%) on Tuesday and closed at 13,660.9. American Intl Group (AIG) was the strongest of the Dow's 30 index components, posting a $2.52 gain to close at $62.05. Exxon Mobil Corp. (XOM) came in a close second in terms of percentage gains and led in terms of price, adding $2.72 to close at $90.38. Citigroup Inc. (C) weighed down the index, falling $0.82 to close at $35.08. The result was that the Dow was the weakest of the three major indices and both the S&P 500 ($SPX) and Nasdaq Composite ($COMPX) experienced larger percentage gains on the day. The S&P 500 rose 18.10 points (+1.2%) and closed at 1,520.27, while the Nasdaq Composite rose 30 points (+1.1%) and closed at 2,825.18.

Volume was strong on Tuesday, but somewhat lighter than on last Friday and this Monday. Volume on the New York Stock Exchange fell just short of 1.5 billion shares. Advancers beat out decliners by close to 2 to 1. On the Nasdaq about 2.5 billion shares were traded. Advancing stocks came out ahead of declining ones by about 4 to 3.

One the main news events for the day was the record close in crude oil. XOM soared, as did the rest of the energy-related sectors, as oil prices rallied. They made a new all-time high of $97.10 a barrel and closed at $96.70 a barrel. The Energy Department's Energy Information Administration will release this past week's U.S. crude oil inventory report on Wednesday at 10:30 ET. Declining imports, particularly from Mexico as a result of strong storm activity in recent months, has contributed to low inventories. In the previous week crude oil inventories fell to their lowest levels in two years. Wednesday's data is likely to reflect that impact even more with a continued decline, while demand has increased in part to colder temperatures and economic growth.

The euro also hit record highs since its debut in January 1999. At one point it hit $1.4571 intraday, leading to yet further weakness for the U.S. dollar. On Thursday the European Central Bank will announce its interest rate decision, which is expected to remain at 4%.



Let's now take a look at the market from a technical standpoint. The session began on Tuesday with a modest gap higher into the open, following some premarket buying heading into about 7:00 am ET. The market managed to hold up into the open for the first 45 minutes of the day, but when the 10:15 ET correction period hit the bears took over and the indices began yet another sharp intraday decline. This has been very typical over the last couple of trading days, but this time the market did not make it back into the prior lows and instead the Nasdaq found support at Monday's opening prices while the S&P 500 and Dow Jones Ind. Ave. hit support at their 15-minute 20 simple moving averages and the middle of the congestion from the prior two days of trading.



By 11:00 ET the market was attempting the reversal off lows. The initial ascent was rather slow as the indices moved on choppy trading into the zone from the previous day's close. The S&P 500 made it to its 5-minute 20 sma resistance zone, but the Dow and Nasdaq fell a bit short before they began to pull lower. The market kept an equal distance from the 5-minute 20 sma as it corrected off that zone, however, and this made it possible to break higher on increasing momentum. The initial pop only took the market into the moving average. A minor correction along the moving average itself into noon then allowed it to break through it.

After hitting some earlier congestion and the equal move zone compared to the initial upside, the market corrected for a second time with a pullback on light volume into the 13:00 ET reversal period. The indices moved steadily out of this bull flag and into a strong test of the morning highs. I had initially been expecting a little more of a pullback at 13:30 ET when the market had established another comparable move and began to slow at the S&Ps's morning highs, but the high at the time held and broke slightly higher into the same resistance zone for the Dow and Nasdaq before pulling back with a larger correction into the 14:00 ET reversal period.



Intraday the market action had been pretty choppy throughout the day into 14:00 ET. There was a great deal of overlap again in prices from one bar to the next on the 5- and 15-minutes charts and at 14:00 ET that chop became even more pronounced as the market formed a larger 15 minute congestion zone. Volume again dropped off somewhat and the 15-minute 20 sma held as support, leading to a break higher out of the 15:00 ET reversal period. This was the most pronounced upside move of the entire session and it continued strongly into the final 30 minutes of trading.

This late day breakout took the indices out of the trading range that had been in place since Friday, and it also means that the market now has a bit higher odds of forming a daily triangle instead of an immediate continuation lower as had taken place back in August. We will need to see the buying hold into Wednesday, however, for this to show greater confimation and currently the market is pulling back afterhours.

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.