The market took off on Tuesday with an extreme upside move that I certainly had not expected. Yes, we were looking for upside on Tuesday, as I mentioned in yesterday's column, but I was not anticipating anything along the lines of the sharp upside move experienced by the indices on Tuesday. The day began with a very rapid rally at 8:30 am ET. The Fed announced that it would loan as much as $200 billion in securities in order to increase liquidity.

When the market opened on Tuesday, the prices were already very overbought. The exhaustion from the initial premarket reaction had extended the indices to a point whereby they found it very difficult to continue at such a pace, if not impossible to do so. The market's reaction was to chop lower though out the morning. The indices found support, however when the 12:00 ET correction period hit. After bouncing into the 5-minute 20 sma resistance, the market retested the day's lows, but it did do at a slower pace and on lighter volume, corresponding to the 15-minute 20 sma support. This created a bullish bias into the afternoon.

The market took off immediately into 13:00ET . Although the 5-minute 20 sma stalled the bulls for a few minutes, it did not last long at all compared to the extreme upside which followed. My focus was upon Apple (AAPL) and Bucyrus Intl (BUCY) during afternoon trade but a lot of other stocks faired well also. In the Dow, only Boeing Co (BA) closed lower.

Once the market planted a foothold on Tuesday, it began to gain momentum. It rather surprised me how fast the indices rode that rally. I was able to time the resistance levels, and hence the mostly likely pivot zones, extremely well. The problem was that each resistance level held for only a couple of minutes, so it was the scalpers and larger time frame position traders that would have prevailed in this latest catactropy. Fanny Mae jumped 11.1%, while Freddie Mac was (losed only main perminters.

The indices all closed at the days highs. I am expecting that on Wednesday we see a lot of overlap, holding Tuesday's range.

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.