Good morning! After five straight days of upside, the market finally took a break intraday on Tuesday. The morning began with a decent downside gap into the open. This decline was comparable to the one Monday afternoon and it found support with that equal move and Monday's lows. With this support hitting early on, the market saw a lot more choppy action again, which lasted throughout the morning.

The slow climb that lasted for the first hour or so of the day stalled when the indices ran into 5 and 15 minute 20 sma resistance. This pushed them back near morning lows and close to their 5 minute 200 sma support intraday. The pace remained similar coming off that level with a more gradual move again back to highs. After a bit of chop at that level between 11:45 and 12:00 ET the market pushed to new intraday highs. The NASDAQ was able to close its gap with that move, but the gap resistance stalled the buyers again for another 45 minutes.

Up until the early afternoon I was watching for a breakdown opportunity into the remainder of the day. With the push to new highs, however, the pace within the intraday range began to turn over. After the NASDAQ closed its gap the market fell into a smaller range along those highs. The correction was not much given the move off lows, but the indices popped when they moved into the 5 minute 20 sma support. This made for a short rally this time around, but was enough to close the gap on both the S&P500 and Dow Jones Ind. Ave.

The market declined steadily off the 13:30 ET highs. This pace was similar to the overall upside move on the 15 minute charts that came ahead of it. As with the morning action, this made the odds more likely for a range. This time it was just on a larger time scale. The selloff from highs stalled as it came back into the 5 minute 200 sma and prior intraday lows. This corresponded with the 14:30 and 15:00 ET reversal zones. After rounding off at that support it moved steadily back into the highs of the range.

While not the stronger pullback in price I was concerned about, the overall range has allowed for nice start to a correction. There isn't a strong reversal pattern forming at this point on the larger 30-120 minute charts, so it seems likely that Wednesday can also be similar to the prior two in terms of price overlap intraday. Room exists for some higher highs on these time frames to allow for the market to round off more for a greater correction off highs, but it's something I want to watch the morning action for to get some better guidance.

Economic Reports and Events
Jan 11: Crude Inventories 01/06 (10:30 am)
Jan 12: Export Prices ex-ag. for Dec. (8:30 am), Import Prices ex-oil for Dec. (8:30 am), Initial Claims 01/07 (8:30 am), Trade Balance for Nov. (8:30 am), Treasury Budget for Dec. (2:00 pm)
Jan 13: Business Inventories for Nov. (8:30 am), Core PPI for Dec. (8:30 am), PPI for Dec. (8:30 am), Retail Sales for Dec. (8:30 am), Retail Sales ex-auto for Dec. (8:30 am), Mich. Sentiment-Prel. for Jan. (9:50 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
Jan 11: -
Jan 12: MI (?), MTG (B), MOS (?)
Jan 13: -
Jan 16: AAPL (A)
Jan 17: ASO (B), CAL (B), INTC (?), MEL (?), SOV (A), WFC (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.