Good day! The market had a rough session on Tuesday. The indices gapped strongly higher into the open. A cease fire between Israel and Hezbollah sent oil stocks plummeting, but helped spur some morning upside in the overall market. The extreme gap led to an open just under 15 minute 200 sma resistance in the S&P 500 and Nasdaq Composite.

As we saw last week, exceptional gaps such as this have a very difficult time holding onto their gains throughout the session except when they come in the form of breakaway gaps (such as out of a trading range or trend channel). Nevertheless, the indices put in a good show throughout the morning. The reaction off the resistance was light and choppy with more of a base into the 5 minute 20 sma support as opposed to a strong correction. Once the 11:00 ET reversal period hit the indices surged, gaining volume as well as momentum. The 15 minute 200 sma broke without a pause and a small bull flag formed just before noon to lead the market even higher mid-day.

Unfortunately for the bulls, the continuation lacked the same enthusiasm as the initial breakout. Strong pivot reversals on the 15 minute charts have been the norm lately and this weaker upside reeked of mid-day reversal potential. Unlike most pivots intraday, however, the market didn't really hit a lot of major types of resistance, such as prior highs or moving averages, so there was a good deal of hesitation as the market turned. Rounded highs such as this that follow a sharp move to the upside in the morning also have less regard for the 15 minute 20 sma as a support level, so the breakdown into 14:00 was easily able to bust through it, taking the S&P 500 and Dow Jones Industrial Average back to morning lows before the selling stalled.

Even these early morning lows were not able to hold the market for long. A small bear flag on the 2-5 minute charts quickly gave in to the urge to close the morning gap and the S&P 500 and Dow both managed to do so as the 15:00 ET reversal period hit. Without the weight of the metal, oil and energy stocks weighting it down, the Nasdaq faired much better than the S&P on Monday. It did manage to hold onto its gap to some extent, instead hitting 5 minute 200 sma support and its morning lows at the same time as the S&Ps and Dow came into the price support of Friday's close. 

By the end of the day all three indices did manage to tack on some gains, thanks in part to the slight correction off the gap support. The Nasdaq Comp. Index ($COMPX) rose 11.33 points (+0.6%), the S&P 500 ($SPX) inched higher by 1.47 points (+0.1%), and Dow Jones. Ind. Ave. ($INDU) gained 9.84 points (0.1%). Top sectors included the airlines, semiconductors, and networkers. Precious metals, oil and energy stocks had a much more difficult time, as did home builders.

Given the constant chop at this time on the 30 and 60 minute charts, I'm focused more on intraday activity with a few select daily patterns for swingtrades. Strong reversals have been occurring every time the market has attempted an upside move over the last month on the intraday charts, and even most of the stronger stocks in the market are having to deal with these flushes. Most of Monday's top performing stocks, for example, were not coming off continued strength from gains heading into Friday's close. Instead they were mainly breaking out of trading range action from last week. Even then, only a few managed to continue moving higher as the afternoon wore on.

Economic Reports and Events
Aug. 15: Core PPI and PPI for July (8:30 am), NY Empire State Index for Aug. (8:30 am), Net Foreign Purchases for June (9:00 am)
Aug. 16: Building Permits, Core CPI, CPI and Housing Starts for July (8:30 am), Capacity Utilization and Industrial Production for July (9:15 am), Crude Inventories 8/11 (10:30 am)
Aug. 17: Initial Claims 8/12 (8:30 am), Leading Indicators for July (10:00 am), Philadelphia Fed for Aug. (12:00 pm)
Aug. 18: Michigan Sentiment - Prel. for Aug. (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.
Aug. 15: ANF, AEOS, AMAT, BRL, BJ, DE, DKS, FOSL, HAR, HD, PETM, SKS, SNDA, SPLS, STP, TJX, UBS, WMT
Aug. 16: ARXX, BEAS, BLI, CAI, CHRS, DAKT, HPQ, HOTT, NTAP, ROST, CRM, SNPS, TLB, EL, TWB, ZUMZ
Aug. 17: ARO, ADSK, BKS, BEBE, BRCD, CHL, CLE, CPWM, DELL, GME, GPS, HIBB, LTD, MRVL, NWY, JWN, SHLD, PLCE
Aug. 18: ANN, FL
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.