Market action was choppy and rather indecisive throughout much of the session on Tuesday. The extreme upside of the prior two sessions had exhausted the momentum for that direction, but the bulls were not quite willing to let go of their long-awaited gains. The day began with very little change from the prior day's closing levels. Despite some decent premarket swings back and forth, the indices merely formed a larger 15-minute trading range.

Within minutes of the opening bell the indices were again moving higher within the premarket range, pulling up off the last premarket low. Although the pace of the move was strong, the 9:45 ET reversal period held in the middle of the range with the 15-minute 20-period simple moving average serving as resistance on the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) intraday.

The market turned lower coming off the intraday resistance and heading into the 10:00 ET consumer confidence data. These losses became even more extended intraday thanks to a much lower reading than expected. The March consumer confidence levels was expected to come in at about 73.3. Instead the consumer confidence index fell from 76.2 in February to 64.5. This is the lowest level it has hit since 2003.

After flushing lower on the data, the market began to recover. Trade was very choppy. The Nasdaq Composite displayed the greatest relative strength, nearly making it back to the day's highs around 11:30 am. This was followed by the S&Ps. The upside had a great deal of overlap as it moved. One bar on a 5-minute time frame included nearly all of the prior one before moving up again. The bull flag which followed was was not very clear as a result, since the momentum on the pullback was stronger than the rally, although volume remained light and the 12:00 ET correction period favored support.

The market continued to creep higher with slightly higher highs into the afternoon. Volume remained the lightest it has in several weeks. It was not until around 14:00 ET that things began to shift. At that point the indices had established three waves of upside intraday with slower overall momentum on each wave. On the final move into 14:00 ET, however, the end of that move increased in momentum, making a sharp reversal difficult.

I had originally been expecting the market to pull lower into the afternoon. The reason I favored this move is because it would have allowed the market to more easily form a longer range for more upside. With just one low on the 30 minute charts within that base at highs, the market would be more likely to form a false upside breakout if it did trigger and just trap people before breaking lower again. Nevertheless, the indices still kept climbing with a final bull flag out of 14:30 ET and into the 15:00 ET reversal period.

The breakout was indeed false when taken into perspective on the larger 30-minute charts. The market began to give way to selling pressure during the final hour of trading with many stocks, such as Baidu (BIDU), falling hard into the closing bell. The weak Dow lost 16.04 points, or 0.1%, on Tuesday, closing at 12,532.60. Top decliners were Bank of America (BAC), which fell 3.5%, and Home Depot (HD), which lost 1.7%. The stronger S&P 500 gained 3.11 points, or 0.2%, and closed at 1,352.99. The Nasdaq, which had the best relative strength on Tuesday, gained 14.30 points, or 0.6%, and settled at 2,341.05.

I am expecting some more corrective action on Wednesday, but on the daily and weekly time frames the indices are looking pretty good. If they can pull off a slow correction along these highs instead of sharply declining, then another solid breakout higher in a couple of weeks is likely. The Dow will have the hardest time pulling off such a correction, while the Nasdaq has the best chance.

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.