The market spent a large chunk of the day chopping around on Monday. The indices had opened in negative territory following the New York Fed manufacturing index data. The index fell to -8.7 in June from -3.2 in May. Meanwhile, economists had been expecting slight improvement. The June indices for new orders, shipments, and unfilled orders were all below May's levels. The index is often viewed as an early indication for what the Institute for Supply Management's national factory survey will show. The next ISM survey is due out on July 1.

The market found itself at decent price and moving average support by the time the opening bell rang and it immediately reacted to those support levels. The action was a bit on the sloppy side, but the market still managed to push higher. The Nasdaq Composite ($COMPX) was the first to close its morning gap around the same time as the 10:15 ET correction period. This was followed by a pullback in the indices and another push higher out of the 10:45 ET correction period.

The S&P 500 ($SPX) was the second of the three major indices to fill its morning gap. It closed it into 11:00 ET, which is yet another correction period in the market. The Nasdaq had shot to new intraday highs at this time and was running into resistance at the 15-minute 200-period simple moving average, as well as closing in on its 20-day sma. The weaker Dow Jones Ind. Ave. ($DJI) also struck its own 15-minute 200 sma with the 11:00 ET correction period and the S&P 500 was completing its third wave of buying at this time. All of these traits helped push the indices into a larger correction off highs into mid-day.

Dow Jones Industrial Average ($DJI)


The stronger Nasdaq held up the best over noon on Monday. The morning rally was significantly stronger-than-average, so the index had a difficult time pulling back off the 11:00 ET highs. The Dow, on the other hand, pulled back very quickly and the S&Ps also fell more rapidly. Both indices pulled back to the 5-minute 20 sma levels where they began to congest. The Nasdaq formed a higher level congestion at the same time so that each of the three indices created Avalanche short setups into noon. The light volume throughout the congestion assisted the market in breaking lower fairly well into mid-day.

Corrective moves within a larger trend often form with two waves in the direction opposite the primary trend. On Monday that trend was higher. The Avalanche into noon formed the second wave of correction off the morning highs on a 5-minute time frame. Unfortunately, the pullback off highs was also on the strong side. This meant that in order to be able to continue the trend easily the market would need some shift in momentum. This was brought about by a longer period of congestion and several false starts. Finally, around 13:10 ET on the heels of a 13:00 ET report out from the National Association of Home Builders, the market broke free of its range and headed to new highs on the day.

The NAHB/Wells Fargo housing-market index fell one point to 18 with only about 1 in 5 builders considering the current market to be favorable. This matches the record low since the survey was created 22 years ago. The largest decline in sentiment was felt in the Northeast and the West, while it remained relatively flat in the Midwest and actually rose slightly in the South.

S&P 500 ($SPX)


The early afternoon rally was just what the Dow needed to be able to close its morning gap. It did so around 13:30 ET and hit additional resistance from Friday's highs. The Nasdaq ran into equal move resistance on its 5-minute time frame as compared to the rally into 11:00 ET at the same time as the Dow was closing its gap. This was also its 30-minute 200 sma zone, which was yet another strong level of resistance. These zones worked together to stall the bulls once again into the second half of the afternoon.

Given the pace of the buying, the correction off highs was once again on the slower side and similar to that of the move out of 11:00 ET in the Nasdaq. This time, however, it was echoed in the Dow and S&Ps as well. The 5-minute 20 sma was support, but like earlier in the day, congestion along this level broke after awhile to trigger another 5-minute Avalanche in the final hour of trade. The late day pullback off highs was felt the most in the Dow and took it back into negative territory.

Nasdaq Composite ($COMPX)


The Dow closed lower by 38.27 points, or 0.3%, on Monday at 12,269.08. Telecommunications led the decline. Verizon Comm. (VZ) lost 2.9%, while AT&T (T) shed 1.4% for the day. Financial companies, however, posted strong gains. Citigroup (C) rose 2%. Bank of America (BAC) climbed 1.81%. JP Morgan Chase (JPM) added 0.91%. The S&P 500 gained 0.11 point on Monday and closed at 1,360.14. Broker/dealers also faired well on the day, as did information technology. LEH and MS were among the NYSE's best performers. Energy stock such as MEE also performed well. The tech sector fueled the Nasdaq though. It gained 20.28 points, or 0.8%, and closed at 2,474.78.

The market is looking a bit bearish into the open on Tuesday on the 60-minute time frames. I am still looking at the week's action as a whole to most likely bring the indices higher, but it is looking like its going to continue to be a choppy climb to get there. We are definitely seeing the greater back and forth action intraday that I had mentioned in yesterday's column and this is likely to continue throughout the week.

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.