The market climbed slowly in premarket trading into Tuesday morning, but it hit a bit of a road bump when the 8:30 ET economic data came out. May's producer price index rose 1.4%. Energy prices rose 4.9%, while food prices rose 0.8%. The gasoline index rose 9.3% in May. The Labor Department stated that the PPI, which tracks inflation at the wholesale level, climbed 7.2% over the past year. May's core PPI, which excludes energy and food prices, rose 0.2%. Over the past year the core prices are up 3%. In other news, the Commerce Department reported a 3.3% decline in housing starts in May. This is the lowest level since March 1991. Starts for single-family homes fell 1%.

The premarket highs, which corresponded to the 8:30 ET data, ended up being the highs of the day. The market began to slide lower into the open and that selling continued into the first several minutes of trade. The Nasdaq ($COMPX) was the first to fall into negative territory since both the Dow Jones Ind. Ave. ($DJI) and S&P 500 ($SPX) futures gapped over the prior day's highs and the Nasdaq did not. The Nasdaq's recent relative strength emerged again, however, coming off initial intraday support levels. These support levels included the S&P's 15-minute 20-period simple moving average, the closing zone from Monday in the Dow, and Monday's mid-day congestion in the Nasdaq.

The Nasdaq bounced sharply off support, while the S&Ps and Dow struggled. This divergence continued throughout the day. Although the indices moved in the same general direction, the Nasdaq's upside was more substantial. While the Dow and S&Ps broke to new lows into the 10:15 ET correction period, the Nasdaq held well above the morning's lows. It bounced back and created a bullish triangle that triggered a buy into the 10:45 ET correction period while at the same time the S&Ps and Dow used that upside to merely form another bear flag.

Dow Jones Industrial Average ($DJI)


The market broke lower soon after the 11:00 ET correction period. The Dow had hit its 5-minute 20 sma resistance at that time, while the S&Ps were back at early morning congestion and the Nasdaq was testing its premarket highs. The sellers came in very quickly and the S&Ps and Dow easily broke to new intraday lows. The pace slowed into 11:30, but the indices crept a bit lower in order to hit support from prior 5-minute lows in the Nasdaq and the 5-minute 200-period sma in the S&Ps. This took place going into noon and the market formed a small bear flag followed by another break lower into 12:30 ET.

The mid-day bear flag triggered a bit on the early side and was not able to sustain as strong of a move as the 11:00 ET breakdown. The momentum began to shift somewhat into the early afternoon. It popped rather quickly just after 13:00 ET and this move took the indices back into the 15-minute 20 sma resistance. The push into that level, however, was slower than the beginning of the move and the indices began to show more of a bearish bias again into the second half of the day.

S&P 500 ($SPX)


The market began to sell off around 13:40 ET, but the Nasdaq didn't join in until the 14:00 ET correction period. A base from 14:30 into the 5-minute 20 sma led to another strong 5-minute move lower, particularly in the Nasdaq, around 15:15 ET. While sloppy, the indices remained weak into the close with the S&Ps pushing into Monday's lows and the Dow into last Friday's lows.

Nasdaq Composite ($COMPX)


The market's 60-minute bearish action heading into Tuesday followed through rather well, but as you can see, the action has been choppier as expected as well. This has made things a bit more difficult and I've ended up jumping out of things much more quickly than I should just to avoid the possibility of getting chopped up myself. My larger outlook has changed slightly due to the late day selling on Tuesday. I had been expecting the lows from last week to hold for about two weeks, but now it looks like the Dow might try for a slightly lower low as the week progresses. This will be particularly true if the downside momentum remains the same again on Wednesday. A slightly lower low, however, has a decent chance to move the market higher again into next week. Right now it's a bit of a waiting game, so my focus is going to be intraday at this time going for smaller time frame setups.

The market closed on Tuesday with a loss of 108.78 points in the Dow, or 0.9%, at 12,160.3. American Express (AXP) was a big loser on the Dow, down 4.3%, while Bank of America (BAC) fell 3.6%, and J.P. Morgan Chase (JPM) lost 2.2%. The S&P 500 fell 9.21 points, or 0.7%, to close at 1,350.93. As indicated by the losses on BAC and JPM, the financials led the downside, falling more than 3%. Consumer discretionaries fell 1.4%. Energy and utilities were the only two industry groups to post gains. The Nasdaq Composite lost 17.05 points, or 0.7%, and closed at 2,457.73.

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.