Good day! The market put in quite an extreme move on Tuesday to kick off the shortened trading week. Even though I was looking for continued correction off last week's highs, I didn't expect quite as strong of a one day move as we saw. The day began with a very strong downside gap into the open. Since this was right into prior lows on the 60-minute charts in the NASDAQ, I expected them to hold initially.

The rally off the 60-minute support was very strong, much more so than I anticipated. I was really looking for more of a range type of correction with a slight upside move, but instead the market took off like a rocket, as a result, it was likely that we'd see a trading range into the afternoon, at least in the NASDAQ.

Resistance finally held on the morning rally as the market came into Friday highs and the SP500 and NASDAQ Composite hit their 5 minute 200 sma. The correction off this level was about as strong as the rally into it, falling in line with higher odds for a trading range going into the afternoon.

As the morning progressed, the NASDAQ began to hug its 5 minute 20 sma support, along with the 15 minute 20 sma support. With volume declining, it was likely that we'd see a breakdown into the early afternoon. After a false start around 11:50 ET, the Avalanche finally triggered just after 12:00 ET. The move was extremely strong, falling all the way to morning lows in NASDAQ before finally hitting support while the SP500 and Dow made significantly lower lows intraday, exchanging roles for the relative strength with the NASDAQ.

Out of the mid-day decent, the market corrected slowly as a result of the strong selling. The 5 minute 20 sma served as resistance and created a Bear Flag in the indices that triggered right around the 14:00 ET reversal period. This led to the third wave of selling into the afternoon intraday and the second technical setup of the afternoon.

When this afternoon drop hit support around 14:30 ET I began to watch for corrective action, some way in which the market would correct to the three waves of selling going into the afternoon. Instead, the pace never managed to turn over and we saw a continuation of the third wave of selling going into the 15:00 ET reversal period, leading to a drop into the close.

On Wednesday, I am looking for some correction to Tuesday's primarily strong downtrend day. The odds are higher for pivot trades intraday off support and resistance levels. Continuation and trend following systems intraday will tend to be more risky.

Regarding the stocks we were watching heading into the day: THQI gapped down into the open and held lows, giving no setup for a short. On the long side, however, CVD triggered and continues to look well. The 20-day sma is now support.

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.