After a choppy session, the indices managed to post modest gains by the end of the day on Tuesday. The Dow Jones Industrial Average ($DJI) recovered 215 points (+1.7%) out of the 240 points it shed the previous day to close at 12,958.44. Citigroup (C) was one of the top gainers following a cash infusion from the Abu Dhabi Investment Authority. It rose by 1.7% (+0.52) to match the overall Dow's performance. JP Morgan Chase & Co. (JPM) faired even better, however, rallying 4.67% (+1.89). Other key gainers in the Dow included Merck & Co. (MRK) (+1.35, +2.34%), American Express Co. (AXP) (+2.08, +3.88%), and Altria Group, Inc. (MO) (+1.91, +2.67%).

In addition to the Dow, the S&P 500 and Nasdaq Composite also did rather well on Tuesday. The S&Ps ($SPX) rose 21.01 points, or 1.5% during the session. The oil sector was a bit of a drag on the S&Ps, despite upgrades by Bear Stearns on BP (BP), Chevron (CVX), and Marathon Oil (MRO). The slight gains in BP and CVX, however, were still better than the oil sector as a whole. Crude futures dropped $3.28 to $94.42/barrel. The Nasdaq ($COMPX) rallied 39.81 points, or 1.6%.



The morning began on Tuesday with a decent upside gap into the opening bell. Continued upside followed, but the momentum waned into the 10:00 ET consumer confidence data. When the report was released the reaction was quite swift. U.S. consumer confidence had fallen in November to 87.3 off the previous level of 95.2. This was significantly less than the 90.2 level that had been anticipated. In other news, homes prices fell 4.5% nationally over the past year according to Standard & Poor. Even cities which had held up well earlier in the year gave way over the past couple of months.



Although the market was disappointed by the data, after about 15 minute of selling the indices began to turn around and regain the earlier upside momentum. Prices climbed into 11:00 ET when some initial resistance hit at the 15 minute 20 simple moving average in the S&P 500 and previous highs in the Nasdaq Composite. The indices diverged a bit over mid-day following this initial upside. All three indices tested these highs once again soon after 11:30 ET, but the S&P 500 and Nasdaq only broke them by a few ticks, creating a reversal pattern, while the Dow made a stronger higher high with a nice bull flag on the 5 minute time frame. The 5 minute 20 sma then held as support on the Dow for another bull flag out of 12:30 ET, while the weaker S&Ps and Nasdaq broke their 5 minute 20 sma support and the morning highs served as resistance into the 13:00 ET reversal zone. The indices then realigned as the market rounded off at highs and gave way to strong selling into 14:00 ET.



After reversing from the highs of the day and breaking the 5 minute 20 sma, that support level became resistance and held as the market formed a 5 minute bear flag into 14:30 ET. The declining volume and slower momentum into the 5 minute 20 were some of the key ingredients for the mid-afternoon continuation to the downside which took place at 14:30. The earlier congestion from the morning, however, held as support and the indices slowly began to roll over into the final hour of trading, regaining upside momentum once again as the closing bell approached. The recovery was strong enough at the end to lead to a close just shy of the day's highs despite having look rather dismal only 90 minutes earlier.

While the market had pulled back some afterhours, the indices are still holding up decently into Wednesday's premarket trading. I am leaning for more upside now on the 60 minute charts due to rounding lows on that time frame, but it will be easy to continue to swing back and forth within a range for another day. In order to confirm the upside bias I would like to see some slower selling or congestion zone on the 60 min. The weekly charts are at support, but the difference in time frames leaves the market open for a lot of wiggle room at this support until the momentum turns higher on the smaller time frames.

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.