The market had an interesting session on Wednesday. Heading into the close the prior day I had been expecting to see a bit more corrective action Wednesday morning, but while the market did pull lower for the first 30-45 minutes of the day, the 5-minute 20-period simple moving average held extremely well and the market rallied strongly off the support. It remained strong until the 11:15 ET correction period hit. Rallies such as those which took place on Tuesday afternoon rarely continue past the first hour of trading the next day. The opening correction did help with this, but it still marked one of the most extreme rallies the market has experienced without taking longer to catch it breath on the way.

Once the market pivoted, it did not take long for it to break through the lower trend channel on the 15-minute time frame. Instead of forming some decent textbook trade patterns, however, things got a bit dicey. The market displayed a markedly bearish bias into the early afternoon, but it didn't really have the strongest, most recognizable bear flags and continuation patterns. Instead one had to rely primarily on the fact that the 15-minute time frame simply had to put in a larger correction given its price exhaustion.

The Nasdaq had a decent channel break coming off 13:30 ET highs, at which point the S&Ps and Dow had perhaps the most obvious bear flag. This was followed by rather mild selling into morning support before the market bounced back into the early afternoon range between 14:15-14:45 ET. The strongest downside move of the day came in the final hour of trading, led by the Nasdaq Composite, which completely fell apart beginning at about 15:00 ET. The selling continued into the close, although the momentum stalled in the final 15 minutes of trade.

The indices finished the day with a 46 point loss in the Dow Jones Industrial Average, an 11.88 point loss in the S&P 500, and an 11.89 point loss in the Nasdaq Composite. 18 of the Dow's 30 components closed lower. The top losers included American Express (AXP) (-2.5%), Microsoft (MSFT) (-2.2%), AT&T (T) (-2.1%), and Bank of America (BAC) (-1.8%).

Making headlines on Wednesday was the fact that once again the dollar had fallen to new lows against the euro, and crude oil again hit new highs following positive economic data from January's industrial production in the 15 nations which make up the currency. The euro hit a new high of $1.5569. Crude oil for April delivery hit an intraday high of $110.20/barrel on the New York Mercantile Exchange, gaining 1.1% on the day.

Wednesday's highs intraday corresponded to the 20-day simple moving averages. This level can be a tough one to break in terms of a resistance zone, particularly once it has fallen out of a trading range such as the one which took place throughout February, and then retests the 20 sma shortly thereafter. I am going to remain more bearish into Thursday, but so far the market is heading strongly lower in afterhours trade. This can leave it with a decent gap down unless it can mange to recover in the early morning premarket hours. 3-4 am ET is a typical time frame for such a correction to take place. The congestion from Tuesday's opening action is going to serve as price support on the 15-60 minute time frames.

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.