Good morning! After that sharp afternoon selling on Monday, the market reacted rather typically in Tuesday's session. We did see a little more downside out of the open. As expected, however, it didn't last past the first hour of the day. The pace of the selling actually began to slow at the 10:45 ET reversal period and the corrective action off the lows continued on a small 2 minute Phoenix into the 11:00 ET reversal period. Although this reversal was slower than the initial decline, the market continued to correct higher into the early afternoon.

I found Tuesday to be a rather difficult day for the market and didn't do a whole lot with it. A lot of the gainers on the day were starting to round off at highs as the day progressed. In other words, they continued to climb, but new highs intraday were less significant than prior ones and the corrections in between were greater. This created a hilltop feel that is a pretty good indicator for an upcoming reversal.

The market pivoted nicely off the 13:00 ET reversal period, but it wasn't until a small base along the 5 minute 20 sma broke that the bears took over. The first drop brought the Dow Jones Ind. Ave. back into morning lows and the S&P500 into its 12:00 breakout zone. This was quite a swap with the prior day's trading when the Dow had the most relative strength and the NASDAQ sold off the most. That extra selling in the NASDAQ really served to over-extend that index as compared to the other two. This gave them more room to move Tuesday afternoon.

You can see that there wasn't much for volume at the 14:00 ET reversal period pivot. This indicated a lack of panic and a chance to head even lower before the close. The pace off the pivot was initially rather strong, however, so it ran the risk of falling into a larger range. Upon hitting the 5 minute 20 sma, the indices began to hug the resistance, creating a Phoenix pattern which would have pushed the market into that larger 5 minute range. Unfortunately for any bulls, that resistance was unable to break and the market sold off again. It put in an equal move on the 5 minute charts as compared to the 13:00 ET decline before bouncing into the last 30 minutes of the day.

Right now the market is acting like it wants to continue the range type of action from Tuesday. We're at a good deal of support on the larger 60 and 120 minute charts and the market hasn't put in a very significant correction yet compared to Monday's drop. It should be a wider range, which will allow for more pivot type of trading. Once again, use added caution over noon and into the afternoon since we only have a few more days before the extended weekend going into Christmas.

Updates: NCI from the 7th has support at the 20 day sma. RAVN hit stops. NTRS, which I have from mid-October as a position trade long is pulling in a bit after making new highs last week. 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. I remain cautious on new swingtrades at this time as we round out the holiday season. I'll start to focus on them once again after New Year's.

Economic Reports and Events
Dec 21: Chain deflator-Final for Q3 (8:30 am), GDP-Final for Q3 (8:30 am), Crude Inventories 12/16 (10:30 am)
Dec 22: Initial Claims 12/17 (8:30 am), Personal Income for Nov. (8:30 am), Personal Spending for Nov. (8:30 am), Leading Indicators for Nov. (10:00 am)
Dec 23: Durable Orders for Nov. (8:30 am), Mich. Sentiment-Rev. for Dec (9:45 am), New Home Sales for Nov. (10:00 am)
Dec 26: -
Dec 27: -

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 21: COMS (A), ATYT (?), BBBY (?), BMET (B), KMX (B), COGN (A), CMC (B), FDO (B), FDX (?), FINL (?), JOYG (B), PAYX (A), RHAT (A), RIMM (?), TIBX (A)
Dec 22: CTAS (B), CAG (B), GIS (?), GPN (B), SLR (?)
Dec 23: -
Dec 26: -
Dec 27: -

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.