Good day! The market had a tougher of trading day on Tuesday. The correction that began off the prior day's lows continued very strongly out of the gate. It started with a gap up into the open and then the market formed a small Bull Flag into 10:00 ET. This flag brought the indices all the way back to last Friday's highs, taking back all of Monday's losses. That price resistance from prior highs was very strong though since it was a larger time frame resistance level intraday and hence was a great place to start looking for a correction.

After a few waves of buying and selling already, it was very likely that the indices would continue to hold their trading range and that we would start to see the range narrow. As such, the correction off highs was more likely to be a slower one. We saw it turn over with the NASDAQ forming a 2T on the 5 minute charts and the Dow Jones Ind. Ave. and SP500 forming descending triangles at highs. These triggered coming out of the 10:45 ET reversal period and led to a pull back to morning lows in the NASDAQ, although the SP500 and Dow held up much better.

The mid-day action in market just got more choppy after an already sloppy start to the day. We saw more downside with the SP500 and Dow both coming into the zone of lows with the 5 minute 200 sma as the NASDAQ once again led the bears. That index put in a third wave of selling on the 5 and 15 minute chart heading into the 13:30 ET reversal period and this helped indicate pace turning over once again into the early afternoon.

Upon reversing, the market pulled up strongly off the 13:30 ET lows and then began to base with the 14:00 ET reversal period. This created a Cup with Handle on the 5 minute charts as the 5 minute 20 sma served as support. Volume dropping off on the correction helped to indicate that the bulls would want to continue to pull the market up into the close. The pattern took the indices strongly into morning highs which again served as resistance.

Overall it wasn't the easiest day for trading. The chop didn't give us much for decent setups. The support and resistance levels held perfectly to allow for pivot trading, but the greater amount of overlap in a trend move added a higher degree of risk since it increased odds for a trader to get scared and bail out of their positions. CVD and AFFX are continuing to hold support and lows from the last couple of days can be used as trailing stops should they break. ANF also triggered on Monday and is looking well with its 20 day sma also support now.

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.