Good morning! Tuesday was a rather slow day for the market ahead of the 2:15 ET FOMC announcement. After a slight gap lower into the open, the market pivoted out of the 9:45 ET reversal period and climbed slowly throughout the morning, making only modest gains. Nevertheless, it was still an upside move, which is typical for the morning of the Fed.

Even though the day got off to a slow start, the market held the reversal periods pretty well and moved nicely between support and resistance levels. The first move higher out of the 9:45 ET reversal period ended at the 10:15 ET one when the market came back into the prior afternoon highs. This combination pushed the indices into a correction over the next hour. The NASDAQ lagged behind a bit, bouncing only back to morning highs over noon, but the S&P500 and Dow Jones Ind. Ave. were able to break a bit higher before the market pulled back once more into the 13:00 ET reversal period.

The market popped slightly out of 13:00 ET, then pulled back again into 14:00 ET. This reversal period came as the indices were running into their 15 minute 20 sma support. The market triggered a buy setup before the Fed announcement was made. This showed a bias for an upside breakout before the anticipated quarter-point rate hike was even broadcast. The rate increase took the federal funds rate to its highest level since May 2001. While this means higher interest rates for many consumers and businesses taking out loans, market participants were happy to see no surprises from the Fed.

The market put in three waves of reaction on the 1 minute charts right away, breaking higher for a few minutes before falling into a base into 14:19 ET. The bulls then took over after the 5 minute base and brought the NASDAQ and S&P500 into the zone from prior highs on the daily charts.

Often you will get a three move reaction on the 5 minute charts as well. This time, however, the second move, starting at 14:23, pulled back only a short distance before trying for the third move in the initial direction. This brief reprieve only gave the market enough room to form a 2T reversal pattern on the S&P500 and Dow by breaking prior highs only slightly and at a slower pace than the prior rally. This trapped bulls buying new highs and led to a correction off the highs until the close.

Over the past several weeks the market has been moving into a nice trading range. We are currently at the third test of highs within the range. Typically this is the one most likely to break, but in terms of the larger picture, the market really has not rested long enough to easily sustain another move higher that is comparable to the prior one. A decent correction will last 1.5-2 times the prior rally to allow a similar continuation. As a result, I would remain more cautious on new swingtrade buys at this time, because the odds are higher for traps to form. We are also into the holidays now so I do not wish to be very aggressive.

Updates from Monday remain unchanged: NCI and PWAV from last Wednesday's column are correcting a bit on the daily charts but remain viable on the larger time frames. RAVN is still of interest as a buy this week, but will have added risk due to its light volume. NTRS, which I have from mid-October as a position trade buy is now breaking out again to highs. The 20 week sma and 100 day sma are support. HSP, a position trade from early September, is currently basing again and also has support at its 20 week sma zone.

Note: I will be out of town attending the Online Trading Expo in Las Vegas for the remainder of the week. I'll be speaking at 8:00 am and 1:00 pm on Friday before heading back home. This column will resume on Monday. Have a great remainder of the week!

Economic Reports and Events
Dec 14: Export Prices ex-ag. for Nov. (8:30 am), Import prices ex-oil for Nov. (8:30 am), Trade Balance for Oct. (8:30 am), Crude Inventories 12/09 (10:30 am)
Dec 15: Core CPI for Nov. (8:30 am), CPI for Nov. (8:30 am), Initial Claims 12/10 (8:30 am), NY Empire State Index for Dec (8:30 am), Net Foreign Purchases (9:00 am), Capacity Utilization for Nov. (9:15 am), Industrial Production for Nov. (9:15 am), Philadelphia Fed for Dec (12:00 pm)
Dec 16: Current Account for Q3 (8:30 am)

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 14: IES (A), WGO (B)
Dec 15: ADBE (A), APOL (B), BSC (?), GS (B), KBH (A), LEN (?), ORCL (A), PIR (?), ZQK (?)
Dec 16: GTK (B)

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.