The market had another strong session on Monday, following through on last week's momentum. Intraday the ES hit highs at the 1361.5 resistance level I targeted last Wednesday and held that high perfectly. The NQ also came directly into the middle of last month's congestion, which we had also been tracking. This zone hit strongly at first in the initial 90 minutes of trading, but momentum slowed as the day continued, stalling over mid-day.

The top story of the day on Monday was once again in Bear Stearns (BSC). BSC was up over 100% following news that J.P. Morgan had quintupled its offer from last Sunday's $2/share to $10/share. This move supported further buying in the financial sector. The Amex Securities Broker Dealer Index rose 2.9% on the day. Some of the financial firms, however, did not hold up as well. Lehman Bros. Holdings Inc. (LEH) fell 4.1%, while Goldman Sachs Group, Inc. (GS) lost 0.4%, Wachovia Corp. (WB) shed 1.5%, and Morgan Stanley (MS) fell 1.8%.

Monday's session began with immediate upside, gapping slightly higher and running straight away. It stalled after about 15 minutes with the 9:45 ET correction period. At that point a range began with the indices hugging highs into the 10:00 ET housing data. Currently, some of the best performers in the S&P are in the housing sector. The morning data boosted gains even further when the National Association of Realtors reported that sales of existing homes in February rose by 2.9% to a seasonally annualized rate of 5.03 million. This beat the 4.85 million pace that was widely anticipated and was the strongest move since last October. Meanwhile, inventories of unsold homes fell 3%. Although still high, this was viewed as very positive. The median sales price dropped to $195,900, which is 8.2% lower than this same time last year. Additional data will be coming out on Wednesday when the Commerce Department reports on sales of new homes.

The strong momentum of the opening action began to slow once the 10:15 ET correction period hit. The indices began a series of bull flags with the Nasdaq holding up the best initially. A higher high brought the market to another peak on the 5-minute charts at the 10:45 ET correction period and the market continued to step higher into the early afternoon with a series of bull flags on the 5-minute time frame. The 5-minute 20 period simple moving average served as support and the lighter volume on each correction favored the upside bias.

By early afternoon, the indices were very well extended. The ES was hitting that resistance target I mentioned earlier and the Nasdaq Composite had also hit equal move levels on a 30-minute time frame as compared to the rally from last Monday and into Wednesday. The slightly higher highs of each bull flag shifted the market's pace from the strong momentum of the opening action to the more moderate upside into lunch. It shifted even further into the early afternoon. After hitting the 5-minute 20 sma zone once again around 13:00 ET, the market was unable to again mount another move to new highs. It fell slightly short of the last highs and began to move sideways on very light volume.

The rounded highs broke with the 14:00 ET correction period, pushing through the 5-minute 20 sma support and gaining speed on the downside as compared to the most recent buying. This weakness remained in play for the remainder of the afternoon. A slow ascent into 14:30 ET created a 5-minute Avalanche type of pattern, leading to a stronger drop into 150:00. A third wave followed coming off the 5-minute 20 sma resistance, although the pull higher into that 20 sma was faster than before and the selling somewhat more gradual into the close. This allowed the indices to bounce and hold up within the afternoon range during the immediate afterhours activity.

The Dow Jones Industrial Average ($DJI) posted gains on the close of 187.32 points, or 1.5%. It ended the session at 12,548.64 with 27 of its 30 components in positive territory. The S&P 500 also rose 1.5%. This amounted to a 30.27 point advance into 1,249.88. The Nasdaq Composite Index ($COMPX) was the darling of the day thanks to its technology components. It rose a whopping 3%, or 68.64 points, and closed at 2,326.75. The Russell 2000 performed even better with a 3.89% in the futures market. Seminconductors ($SOX) alone rose 3.7%. Notable standouts in the technology sector included Apple Inc. (AAPL) with a gain of 4.7%, Google Inc. (GOOG) with a 6.2% upside move, and Hewlett-Packard Co. (HPQ), which rose 3.1%. I think we may still see these gains extend even further into the early morning trade, but am looking for a correction off resistance into the afternoon on Tuesday.

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.