Good morning! Pace was the key ingredient heading into Tuesday. Throughout Monday afternoon, the market kept trying to form short patterns to continue the morning selling. Every time it tried to move lower, however, the bulls would pop it back up. Overall the downside moves were more gradual than the upside ones. This meant that while the 15 minute charts appeared lower, the action within the trading range favored the bulls. This followed through into the next morning with a decent upside gap, leading to an open right into price resistance from Friday's highs in both the NASDAQ Composite and S&P500.

The strong overhead resistance on the 15 minute charts helped stall the buyers initially. The correction off those highs was slow and on declining volume. After hitting support from the trading action early Monday morning, the market began to climb once again, breaking strongly to new intraday highs. This rally stalled as the Dow came into Friday's afternoon highs and its 15 minute 200 sma, leading to another pullback into the latter half of the morning.

Even though the 10:30 ET correction from highs picked up speed into 11:15 ET as it came back into the prior 5 minute breakout zone, it managed to make it back up to the congestion near highs once more. The strong drop on the 2 minute charts kept that high from breaking right away, but a base into the 12:00 ET reversal period along that resistance allowed for enough of a change in pace once more to create follow through on an early afternoon rally.

By 12:30 ET, the market was fairly exhausted after such a monumental ascent off the prior day's lows. It began to fall into a range along the intraday highs. While the potential was there for a trend day, the market really needed a larger intraday correction. As the range developed, we once again ran into the issue of pace. The indices began to hug the lows of the range as the 15 minute 20 sma closed in. Despite the base forming at highs, this bearish bias within the range really made it difficult for further upside to develop. As the 15:00 ET reversal period hit, that seemed to be all that the market needed to take a leap off the ledge.

Tuesday's reversal was a narrower range one than the prior afternoon into Tuesday morning, but the basic technical action behind it was the same. For the past week we have seen the market pop and drop a number of times. In the Dow this is forming a descending triangle on the 120 minute charts. The slightly higher highs in the NASDAQ and S&P500 are creating a rounded feel to the highs. This can lead to a more rapid continuation of the correction we started to see last week on the daily charts than initially anticipated. Although we are now needing a bit of a rest intraday to the selloff in order to get more than just scalp trading, my bias is turning more bearish for my shorter term outlook on the daily charts. My weekly to monthly outlook, however, remains bullish.

Economic Reports and Events
Dec 07: Crude Inventories 12/2 (10:30 am), Consumer Credit for Oct. (3:00 pm)
Dec 08: Initial Claims 12/03 (8:30 am)
Dec 09: Mich. Sentiment-Prel. for Dec (9:45 am), Wholesale Inventories for Oct. (10:00 am)
Dec 12: Treasury budget for Nov. (2:00 pm)
Dec 13: Retail Sales for Nov. (8:30 am), Retail sales ex-auto for Nov. (8:30 am), Business Inventories for Oct. (10:00 am), FOMC policy announcement (2:15 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stock's earnings date before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Dec. 07: HOV (A), PLL (B)
Dec. 08: COST (?), CMOS (?), FLE (B), NSM (?), TOL (B)
Dec. 09: PPHM (B)
Dec. 12: COO (A),
Dec. 13: ADCT (A), BBY (?), MATK (A)

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.