Tuesday was one of the narrowest and most choppy sessions the market has seen in months. Volume was light despite the modest downside gap, which would typically bring in additional volume. This suggested that despite the size of the gap, the bulls were not overly concerned, nor were the bears quick to jump. Instead the general mood was "wait and see."

Large gaps in the market overall tend to begin to close within the first 15 minutes of the day. The market maintained this bias on Tuesday as well, but the upside out of the opening bell was not very convincing. The Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) both established three waves of buying on the 5-minute time frame before hitting resistance at the 10:45 ET correction period, but the upside was not very steady and prices experienced a strong degree of overlap from one bar to the next on the way. While my bias was bullish out of the open as I expressed in the prior evening's column, I stayed away from the indices themselves and focused upon individual equities instead in order to avoid the volatility.

The market continued to hold up as the morning progressed. It took another 45 minutes for the Dow to close its morning gap. The Nasdaq and S&Ps also played around in the zone of Monday's close while momentum on the upside shifted. This was most noticeable in the Nasdaq which crept higher into 11:30 ET before giving way to a strong pullback off the 15-minute 20-period simple moving average. This same resistance level also held in both the Dow and S&Ps and helped the market turn lower going into the afternoon.

Even though the market reversed course, it still ran into the same trouble it had on the upside for the most part. After the initial 20 minutes of downside the indices fell into a congestion zone. It crept somewhat lower into the opening price level around 13:30 ET, but trade remained on the choppy side. The 5- and 15-minute 20 period simple moving averages held as resistance with the indices sliding down them throughout much of the afternoon. A strong drop took place following the 14:00 ET FOMC Minutes, but even the Fed's lack of enthusiasm (to say the least) about the economy failed to lead to a sustained selloff.

The market took back a lot of the early afternoon losses in the Dow and S&Ps in the final 90 minutes of trade. The Nasdaq had a more difficult time. Although the Dow and S&Ps closed above their opening levels, the Nasdaq was relatively unchanged from its open. The Dow closed at 12,576.44, lower by 35.99 points, or 0.3%. The S&Ps ended the day at 1,365.53, down 7 points, or 0.5%. The Nasdaq Composite lost 16.07 points, or 0.7%. It closed at 2,348.76. The market remains in a corrective stage on the daily time frame heading into Wednesday. The 20-day sma is still going to be support. The market should open up, however, as compared to Tuesday's action and offer some more decent intraday moves.

Semiconductors (-2.77%), housing sector equities (-2.37%), and banking stocks (-2.15%) were the worst performing sectors on Tuesday. Oil-related equities (+0.75%), natural gas (+1.56%), health care (+1.72%), and airlines (+0.41%) led on the upside.

On the news front, the National Association of Realtors reported data on pending home sales at 10:00 ET. The index for sales contracts on previously owned homes was down 1.9% in February. This is 21.4% lower than February of last year. January's levels, however, were revised slightly higher, which took some of the sting out. The South remained the hardest hit, falling 5.5%, while the Northeast saw an increase of 3.2%.







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.