The market experienced some very nice trends on Tuesday, following through very well with our expectations once again heading into the day. It gave us a nice downside move initially, followed by the strong late day reversal we had been expecting. Although the Dow Jones Ind. Ave. ($DJI) was down more than 200 points intraday, by the closing bell it had recouped all by 45.10 points of that loss, or -0.4%. The Dow closed at 12,213.80. The S&P 500 ($SPX) lost 4.59 points on the day, or 0.3%. It closed at 1,326.75. The Nasdaq Composite ($COMPX) did so well on its late day recovery that it managed a tiny gain of 1.68 point and closed at 2,260.28.

After gapping lower into the open on Tuesday, the indices fell into a very choppy and narrow range. Little happened throughout the first hour of trading, but the 15-minute 20 sma served as resistance, and as soon as it hit the market began to move lower once again. This was the strongest downside of the day, taking the indices to new intraday lows and past Monday's lows. The selling continued into the 11:00 ET reversal period, but when that hit the buyers did not emerge right away. Instead, the volume remained light as the market slowly pulled into the 5-minute 20 sma, congested, and broke higher for a second wave of correction before heading lower into 13:00 ET.

The early to mid-afternoon action in the market was very choppy. Even though the indices made steadily lower lows, none of the moves adequately broke through the previous low. Instead, a series of three lows merely created the reversal pattern we were looking for to favor that upside reversal into the afternoon. The market had begun to chop along under the 15-minute 20-period simple moving average ever since the mid-day bounce into about 12:30 ET. This resistance held until the market finally broke higher after reversing a final time out of the 14:00 ET reversal period.

The momentum bias shifted on a 5-minute time frame just before the bulls took off. Just prior to 14:30 ET the indices had popped back up into the 5-minute 20 sma. At that point they congested along that resistance for a couple of minutes, creating that momentum shift before finally breaking higher just after 14:30 ET. The rally was extreme and fueled once again by news from Ambac Financial (ABK), which the Financial Times reported would receive an infusion of capital as earl as this Wednesday.

Some of the other top gainers on Tuesday included Genentech Inc. (DNA) (+1.79%), Entergy Corp. (ETR) (+2.86%), Applied Materials (AMAT) (+7.63%), and Amazon (AMZN) (+4.66%). Among the top losers on Tuesday were Monsanto Co (MON) (-5.82%), Freeport-McMoran Copper & Gold (FCX) (-4.37%), Tessera Tech. (TSRA) (-38.99%), and Pan American Silver Corp (PAAS) (-5.54%).

On Wednesday I am anticipating continued corrective action off Tuesday's lows, but with greater back and forth moves on the 30-minute time frame, as opposed to one swift upside continuation. 12,380 will be initial resistance in the Dow once Monday's congestion level breaks. 2,290 is resistance in the Nasdaq Comp.

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.