The market has been chopping around, uncertain just what to do next for the past week and a half. On Friday, however, the bulls welcomed news out of bond insurer Ambac (ABK) regarding plans for providing relief. The market surged into the close, but this left it extended into the morning on Monday. The result was a pullback immediately out of the gate, which lasted into the 10:00 am ET home data.

Friday's uptrend continued on the heels of the release of January's existing home sales numbers. Even though resales of homes in the U.S. slipped 0.4% in January to a seasonally adjusted annualized rate of 4.89 million, it was stronger than the 4.8 million expected. This stronger-than-expected report brought hope to a housing market plagued in foreclosures and extremely sluggish sales. The low mortgage rates and dramatically lower housing prices have led to speculation that the market will start to see an increase in sales.

With tougher lending practices and the widespread credit woes of the nation, however, I am not hopeful that my house here in Southern Florida, which I first listed 2 years ago, is any closer to selling than it was then! Of course, it might help if I relisted it.... Hmmm... On the plus side, you can get simply amazing deals if you are relocating, including in the rental market. Just yesterday I came across several multi-million dollar homes renting for as little as $900 a month for a 5 bedroom in Orlando. Crazy....

In all seriousness though, I would not expect any rapid recovery in the real estate market without a nice rounding off at lows and a more gradual reversal to begin with. Market prices in real estate can be analyzed in much the same way as the prices of any security and a good comparison to look at would be the 2002-2003 lows in the Dow, S&Ps and Nasdaq. A pop and retracement lower once again would be normal and probably correspond to typical seasonal highs and lows in the housing market.

After bottoming out at 10:00 am ET, the market established three decent moves higher on a 2 minute time frame before running into solid price resistance on a 15 minute time frame. The Dow Jones Industrial Average ($DJI) hit its highs from Thursday, while the Nasdaq Composite ($COMPX) returned to the late Thursday morning congestion zone before stalling its ascent. Since three waves usually exhausts a trend move, the resistance cinched the deal. The Nasdaq had stalled a bit earlier at its resistance level and fell into a triangle trading range, while the S&Ps and Dow pivoted off highs a little later in the morning at the 11:00 ET reversal period.

The momentum of the rally, while not as steep as the prior afternoon, was still faster-than-average, so it didn't turn over too quickly at the highs initially. Instead, the indices began to favor the lower end of a small range along the highs. Real selling did not begin until about 11:30 am ET, but it was followed by a steady retracement off the highs into the 15 minute 20 sma 200 simple moving averages in the major indices intraday.

Although the support held at 12:30 ET, the bulls were not able to immediately regain control. A small two-wave bounce reversed again into 13:30 ET, leading to a retest of morning lows in the Nasdaq. All three of the indices then fell into a trading range with a somewhat uncertain outcome until news once again rocked the boat at roughly 14:25 ET. The bond insurers again made waves when Standard & Poor affirmed the AAA rating of ABK's bond insurance business. Additionally, it took the AAA rating of MBIA's bond insurer until off its CreditWatch. ABK continued its rally with a 15.9% gain on Monday, mirrored in MBIA Inc. (MBI), which rose 19.7%.

All the major indices popped on the latest development. An initial surge was followed by a picture-perfect two-wave continuation move, which took the market into new intraday highs just prior to the closing bell. The Dow closed higher by 189.20 points, or 1.5%, at 12,570.22. The S&P 500 gained 18.69 points, or 1.4%, and closed at 1,371.8. The Nasdaq Composite added 24.13 points, or 1.1%. It ended the session at 2,327.48.

I am looking for a correction off Monday's highs going into Tuesday. We may see some slightly higher highs in the morning, but then a pullback which materializes on a 60-minute time frame is going to be most probable. The 12,800 level remains Dow resistance on the daily time frame, but the 12,700 zone will hit first intraday to provide for a little bit of a pullback should it manage to hold up enough to attempt to work its way higher. The correction on the 60-minute will help with a more solid outlook, but a week of choppy trading seems likely as a whole.

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.