After pivoting strongly off highs last week, the downside momentum in the market has slowed. In the Nasdaq, that selling held lows last Thursday, but the selling continued in both the Dow Jones Industrial Average and S&P 500 on Monday morning. While the Nasdaq had gapped higher, the typically resilient Dow struggled, in large part due to the disclosure of potential credit-related issues by American International Group Inc. (AIG) (-11.72%). Other financial shares also had a more difficult time. J.P. Morgan was the third weakest stock in the Dow, falling 1.07%. Citigroup Inc. (C) fell 0.85%, while American Express Co. (AXP) lost 0.78%.

Although the Nasdaq Comp. opened higher, its gains were eroded early on while the Dow and S&Ps slid lower throughout the first 45 minutes of the day. Support hit between 10:45 and 11:00 am ET when the S&P 500 hit Friday's lows for price support and the Nasdaq ran into its 5-minute 20-period simple moving average intraday after having closed its upside gap. After stalling at the support levels for a few moments, the bulls began to take over.

The Dow and S&Ps have been the most downtrodden the past several trading days, while the Nasdaq has held up quite well comparatively. Unfortunately, this also meant that it had greater daily upside extension, so as it climbed off the morning lows, prices overlapped to a greater degree than in the other two indices and the pace of the buying was slightly more gradual. Resistance hit on this initial intraday rally when the indices came into their opening highs. This price zone corresponded to the S&Ps 5-minute 200 sma intraday as well.

After a nice two-wave correction mid-day on Monday, the market continued higher. Lows held at the 12:00 ET correction period, right as the Dow and S&Ps hit their 5-minute 20 sma support and the Nasdaq came into the gap support once again. The upside move was a bit early, so the market fell back into 12:30 ET before breaking to new intraday highs. The buying was steady into the 13:00 ET correction period, with the Nasdaq once again moving at a more gradual pace as compared to the other two.

After rising into resistance at the Nasdaq's 15-minute 20 sma and the previous highs in the Dow and S&Ps, the market began to struggle. Although the market trended nicely up until this point in the day, both to the downside earlier and then on the upside reversal, the afternoon was much more difficult. The market chopped around throughout the final three hours of the day, making very little progress either way. Some rounded highs pulled the indices back into 14:30 ET, but price support from earlier in the day held well and the market closed in the middle of the afternoon's range. The Dow had gained 57.88 points (+0.5%), while the S&P 500 rose 7.84 points (+0.6%) and the Nasdaq Composite added 15.21 points (+0.7%.)

While there is room for a 15-minute base or pullback on Tuesday, the intraday bias is still bullish. I am concerned, however, that this upside is going to be short-lived and that we will see selling once again into the end of the week or the beginning of next with another test of the daily lows.

Dow Jones Industrial Average ($DJI)


S&P 500 ($SPX)


Nasdaq Composite ($COMPX)


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.