The market posted gains on Wednesday, but not without breaking to new lows on the year first! The session began with a lot of choppy activity as the indices corrected from the previous afternoon's massive selloff. Such moves have a difficult time bouncing back quickly, so the range type of action was fairly typical. As the range narrowed the volume dropped off and the momentum stalled on the upside moves within the trading range on the 5-minute time frame as compared to the downside moves. These all set the stage for continued selling on the day.



The indices broke down originally out of the range at about 11:30 am ET. This was too early given the larger 15-30 minute selloff and the result was only a brief 30-minute drop into the 12:00 correction period. At that point the indices had established a slightly lower low on those time frames. The slower selling compared to the previous afternoon helped the market bounce higher into the early afternoon, but the congestion from the morning's activity held the move and another range on the 5-minute time frame formed, creating a second breakdown on the 15-minute time frame into 13:00 ET. This is another typical correction period for the market intraday.



The momentum again slowed on the selling as the indices chopped their way lower. They broke to new lows once more on the day and this created a momentum reversal pattern on the 15-minute charts with three established lows once the third downtrend channel broke higher into 14:30 ET. At this point it became fairly certain that the day's lows would hold. Within about 15-minute of hitting those lows the momentum began to increase and quickly overtook the bears. The market shot first back into mid-day congestion and then rapidly broke through that resistance and into the morning highs. At that larger resistance they fell into some congestion, but still managed to force their way to new intraday highs into the closing bell.



The Dow Jones Industrial Average ($DJI) finished higher on Wednesday by 146.24 points, or 1.2%, to close at 12, 735.3. 24 of its 30 components posted gains on the session. It was led by E.I. du Pont de Neumours & Co. (DD). DD rose 4.8% on the day. General Motors Corp. (GM) was one of the main losers, dropping 2.2%. The S&P 500 ($SPX) rose 18.94 points, or 1.4%. It closed at 1,409.13. The Nasdaq Composite also climbed 1.4%, which amounted to a 34.04 point gain and a close at 2,474.55. This was the first positive close in over a week. Earlier in the session, gold futures hit record highs of $894.40 in electronic trading. In other news, rumors on Tuesday of Countrywide Financial Corp. (CFC) filing for bankruptcy, which were denied by the company, continued to weigh down the stock, which closed lower by another 6.4%.

As the week progresses, we are likely to see some movement now off these current daily lows, but as I said yesterday, the odds are higher for more choppy upside with wider swings on 15 minute charts. The volume was strong in Wednesday's session and this will help a correction off lows, but sustaining rapid upside move intraday from one day into the next will be difficult.

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.