Good day! Tuesday morning began on a bit weaker of a note than I was expecting heading into the session. Alcoa (AA) had missed revenues and began the day sharply lower. Lucent Tech. (LU) also warned, taking the well-beaten stock to new 52 week lows. Breaking tradition, the Nasdaq managed to outperform the Dow Jones Ind. Ave. and S&P 500. While all three indices opened lower, the Nasdaq managed to hold up the best throughout the morning, although the market overall continued to sell off after basing for the first 30 minutes.

Volume spiked in the Dow and S&P on the decline, triggering an exhaustion move into the 11:00 am ET reversal period. The Dow ran into its 20 day sma support and the Nasdaq hit prior daily lows at this time. The overall pace or momentum on the selling, however, was still on the strong side, making it difficult for the market to pivot strongly off the support zones. Instead the market crept higher into the early afternoon, although the volume remained steady. Declining volume would have indicated greater market weakness. Instead, once the 15 minute 20 sma resistance hit, volume declined as the market corrected off that resistance level, showing less interest in the selling.

This mid-day decline was again a slower paced move and it created more of a bullish pattern on the 5 minute charts heading into the middle of the afternoon. Usually this would have led to a bit longer of a consolidation coming off a second pivot low, because the correction was not much slower than the last rally and it retraced more than 50% of the prior upside.  Instead the steady selling came to an abrupt halt with the assistance of news from KLAC. The company announced that its June orders pushed the company over its target levels. KLAC alone rallied more than 8% on the news, but the tech sector as a whole went ballistic after the news broke the indices out of their intraday trading range.

Initial buying took the market into 5 minute 200 sma resistance around 14:15 ET. The Dow used this chance to close its morning gap, while the S&Ps came into price resistance from the prior day. All of these hit at once and led to a break in the buying until the onset of the 15:00 ET reversal period when the indices hit 5 minute 20 sma support on a very light volume pullback. This created a strong bull flag that took the market quickly to new intraday highs. This time the Nasdaq was a bit more reserved. The S&P 500 had the strongest continuation, making it back into the zone of the prior day's highs where the 15 minute 200 sma was also residing. The Dow hit the same moving average resistance at that time, leading to a slowdown in the buying for the last half hour of the day.

Most of the daily charts I came across Tuesday evening are favorable for further upside at this time, although the afternoon rally extended many stocks intraday. The Nasdaq has the best strength. As a whole I will be focusing more on daytrades since this combination of daily support and intraday resistance can easily push the market into more of a choppy range and many of the shorts from the past week still look lower over the next couple of weeks, despite some reprieve from the selling pressure.

Economic Reports and Events
July 12: Trade Balance for May (8:30 am), Crude Inventories 7/7 (10:30 am)
July 13: Initial Claims 7/8 (8:30 am), Treasury Budget for June (2:00 pm)
July 14: Business Inventories for May (8:30 am), Export Prices ex-ag for June (8:30 am), Import Prices ex-oil for June (8:30 am), Retail Sales for June (8:30 am), Michigan Sentiment - prel. for July (9:50 am), Business Inventories for May (10:00 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
July 12: AIR (B), FLS (?), GCI (B), INFY (?), PKX (A), RECN (A), TKLC (?)
July 13: CTAS (A), FLE (B), MAR (B), NXY (?), PEP (B), TXI (?), TRB (B), VCP (B)
July 14: FNFG (B), GE (?), RF (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.