The market had another high volatility day on Tuesday as the first full week of trading of the new year continued. It was also another very disappointing day for the bulls. Heading into the session I was looking for a greater correction off Monday's lows and into the 20-day simple moving average. Weakness hit rather early on, however, making it very difficult for the bulls to gain any hold on the market whatsoever. Yes, the market did begin on a positive note, continuing the previous afternoon's closing rally, but the bulls were sluggish and only made their way back into the zone of previous 15-minute highs and the highs of the larger congestion zone on the 30-minute time frame. Once that resistance level hit, the bears again took over.



The market headed steadily lower throughout the second half of the afternoon and into the 12:00 ET correction period. The move was steady on the 15-minute time frame, but choppy on the smaller time frames. There was not a strong indication of exhaustion when the lows were established, merely the 12:00 ET correction period hitting and support from Friday and Monday price levels. This was due to the slower momentum on the selling than had taken place on Monday morning and it was also an indication that the market would then attempt another move higher into the afternoon.



When the market did reverse, the momentum still failed to confirm a change in bias. The buying was even slower than the morning's decline and the volume also dropped off, meaning that while the market did manage to climb higher, the bulls were also lacking conviction. As the Nasdaq Composite hit the morning highs it suggested that a double top was in the making. The slower momentum and lighter volume played a big factor in those highs holding and it allowed the market to turn around into the final hour and a half of trading.

Aiding the late day plunge was news out of AT&T (T). A report out at 14:30 ET announced slowing U.S. growth in the U.S. as a contributing factor in hurting the company's consumer business. The overall market was barely holding on before the news hit, but once it did it opened the flood gates. The market sold off sharply and even though it found support initially at about 15:20 ET with AT&T, it resumed its selloff into the close while AT&T held the 15:20 ET lows.



By the closing bell, all three of the major indices were trading at the day's lows. The Dow Jones Industrial Average ($DJI) had fallen an additional 238.42 points, or 1.9%. It closed at 12,589.1 with 25 of its 30 components losing ground. AT&T (T) alone lost 4.6%. Citigroup Inc. (C) was close, falling 4%. J.P. Morgan Chase (JPM) also lost 4%. The S&P 500 ($SPX) lost 25.99 points, or 1.8%, or Tuesday, while the Nasdaq Composite ($COMPX) fell 58.95 points, or 2.4%.

Countrywide (CFC) was one of the largest losers on the day, falling 17.2% after a story in the New York Times led to speculation that the company may end up deciding to file for bankruptcy. At one point it was down by more than 30%. Gold futures, on the other hand, soared to new all-time highs. February's delivery contract hit $884/ounce.

Due to the extended selling on Tuesday, my bias has changed a bit for the remainder of the week. The door is now open for some continued selling and corrections off support are now likely to be even more gradual than they would have been had the market held Monday's lows.

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.