Good day! The weakness we were looking at heading into the week continued full force on Tuesday. It was a slower decline than the prior day, but the Dow Jones Industrial Average still managed to lose 86.44 points by the end of the day. The S&P 500 also moved steadily lower, falling 12.71 points. The Nasdaq Composite had slightly more strength intraday on the upswings, but there was not as much divergence amongst the three indices as we have seen in recent months. It fell 18.85 points, or 0.9%, while the Dow lost 0.8% and the S&Ps lost 1%.

One of the two weakest sectors on Tuesday was gold, which fell 4.4%. Gold felt the pressure in part due to strength in the dollar. Interestingly, while out to dinner last weekend, I overheard two ladies who were in their late 70s or early 80s discussing how they were thinking about investing in gold. While not meaning to eavesdrop, it was apparent that they knew next to nothing about investing in general, only that many of their friends had done very well in precious metals in recent years and this pullback was just what was needed to take a position.

This reminded me of the conversations I witnessed in 2000 on the tech stocks. Unfortunately, by the time the average layman hears about and gains confidence in a particular sector of the market, it tends to be too little, too late. Yes, there is support here in gold, coming at December highs and the prior lows of March, but the pace of the selling has been extreme, making corrections off these levels a lot more difficult and higher risk if expecting them to be able to hold here and bounce steadily to new highs. It's very similar to where Google (GOOG) was back in mid-February to give you a comparison for a possible scenario, although a bounce such as took place coming out of mid-March in GOOG is by no means assured on gold unless the pace turns around like it did on the pullback in GOOG from late-Feb. to mid-March.

The brokers also felt a great deal of pressure on Tuesday. Even though Goldman Sachs Group's (GS) earnings more than doubled, its chief financial officer warned that continued market weakness could easily take a toll on the company's results in upcoming quarters. The stock fell 4% on the day, but the sector as a whole performed even more poorly, losing 4.8%. Goldman's news was similar to Monday's results from Lehman Brothers (LEH). LEH also saw a significant revenue post over the prior year, but showed a slowdown in recent months. Of the three major brokers to report this week, Bear Stearns is still left and is due out on Thursday ahead of the open.

This week's heavy schedule of economic data releases aided Tuesday's heavy volume. According to the Labor Department, U.S. prices for finished goods, watched for its correlation to wholesale inflation, rose 0.2% in May. The month's core prices (excluding food and energy) rose 0.3%, while intermediate goods saw a price increase of 1.1%. All pointed towards growing inflationary pressures. The Commerce Department also reported on retail sales, which rose 0.1% in May, while sales excluding autos rose 0.5%. Business inventories rose 0.4% in April, while sales increased 0.6%. All in all the data fell within expectations.

Breaking down some of these reports, food prices fell 0.5%, crude goods prices rose 2%, energy rose 0.4%, gasoline prices increased 2.2%, natural gas fell 3.1%, car prices fell 0.4%, heavy truck prices fell 1.4%, durable good manufacturing prices rose 4.4%, construction materials climbed 1.2%. The largest gainers were nonferrous wire and cable, which rose 17%, copper and brass mill shapes climbed 23%, crude basic materials prices increased 6.2%, nonferrous scrap rose 16% and nonferrous metal ore prices, which rose 12% (the last two reaching the highest levels in well over 20 years).

Wednesday's consumer-price report is highly anticipated for greater insight on the current rate of inflation and how that may affect upcoming Fed decisions regarding rates. Retail inflation for May is expected to rise 0.4%, while core inflation (excluding energy and food) is anticipated to rise 0.2%.

Trading on Tuesday was actually fairly decent intraday. I only had a couple of positions due to trying to take care of last minute arrangement before I head out on vacation tomorrow, but the indices followed technical triggers and patterns very well throughout the session. As you can see on the 5 minute charts, many of the most noticeable support and resistance levels, as well as correction or reversal periods, held perfectly.

The main con for Tuesday was that unless you like to short, the upside opportunities were limited and brief in nature. There simply wasn't a lot showing upside momentum throughout the session. INTC saw the largest gains on the Dow, rising 1.5%, but most of that was right out of the open and then on one continuation into noon. BBY also had a strong session, moving up by 5.4%. The majority of that came from the opening gap and initial 15 minute rally, however, and it actually closed only a few ticks from those 15 minute highs.

The market overall had a strong open, moving sharply higher for the first 20-25 minutes of the day. Nevertheless, the indices slowed into 10:00 ET as they ran into 15 minute 20 sma resistance and price resistance from Monday. They reacted sharply to those levels, making a trading range into the early afternoon more likely. They did manage a slightly lower low into the 11:00 ET reversal period, but this merely trapped late-arriving bears and flushed out overly eager bulls before pulling up within the range. While the Nasdaq retraced to morning highs, the S&P 500 and Dow both held 15 minute 20 sma resistance for a second time into the 12:00 ET reversal period, leading eventually to a third test of intraday lows.

The upside action within the range slowed in the market going into the early afternoon. A base along the 5-minute 20 sma led to the third attempt at lows going into 13:30 ET. The market reacted mildly to that level, breaking it coming out of the 14:00 ET reversal period. This made for a third wave of selling on the 5 minute charts since the mid-day highs, however, and meant that it would easier for the next 5 minute correction to be much stronger than the ones at 12:30 and 13:30 ET. This came with a sharp pivot off the 15:00 ET reversal period that took the indices back to the prior 5 minute highs in just half the time it took to move off those levels, but it still fell back into lows ahead of the close.

Both the S&P 500 and Dow Jones Industrial Average are now more strongly testing their 20-month simple moving averages. I still think we'll see greater correction off them starting this week, but, like yesterday, the intraday action remains more bearish. A strong volume spike on Wednesday would help show a stronger flush in the market, but we also need to see the downside pace intraday slow as compared to upside momentum. Despite some stronger upside moves on Tuesday, the downside remained just as rapid, which aided the larger range bound action throughout much of the session. The second part of the equation, slower selling, is needed to create any larger correction off lows.

I'll be taking off on Wednesday for my first "real" vacation since 2002. I'm heading back to Iowa and then Minnesota for some good, old-fashioned camping... sans internet and electricity. I can't wait! Hopefully I won't have withdrawal before I get back! As such, however, you won't be hearing from me for a bit. I'll be back on the 27th and will resume this column at that time. If you happen to drop me a line in the interim, just bear in mind that it may be a few days before I am able to get back to you. I wish you all a wonderful two weeks.

Note: For continuity on the intraday charts, the contract month used above is for June (Symbol: M). Futures traders should currently now be using the September contracts (Symbol: U).

Economic Reports and Events
June 14: Core CPI and CPI for May (8:30 AM), Crude Inventories 6/10 (10:30 AM), Fed's Beige Book (2:00 PM)
June 15: 6/10 Initial Claims and NY Empire State Index for June (8:30 AM), Net Foreign Purchases for April (9:00 AM), Capacity Utilization and Industrial Production for May (9:15 AM), June Philadelphia Fed (12:00 PM)
June 16: Q1 Current Account (8:30 AM), Michigan Sentiment-Prel. for June (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
June 14: CPST (?)
June 15: BSC (B), KBH (A), MBT (?), OVTI (?), PIR (B), PGR (?)
June 16: WGO (B)
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance. Occasionally changes will occur that are made after the posting of this column.

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.