Good morning! The market gapped down significantly on Tuesday following the release of the Producer Price Index. The PPI came in with the largest monthly gain in several decades, rising 2% in November. The core PPI, which excludes food and energy prices, rose 1.3%. A lot of the premarket losses, however, came from earlier selling in the premarket and increased into the open. The resulting gap and initial selling took the market into the price support of the congestion from earlier this month that we were looking at heading into the day, as well as the 50 day simple moving averages in the Nasdaq Composite and S&P 500. The strength of the support allowed for a decent correction off the lows to begin.

The market faired well throughout the day, rounding off at the lows to give us the scenario I discussed yesterday. Initial resistance from the gap, prior day's lows and 15 minute 20 simple moving averages held the bulls in throughout the morning, but the pace continued to turn over into the early afternoon. The market was unable to sustain any intraday attempts at selling, and the indices based from about 12:40 to 13:30 ET along the 5 and 15 minute 20 sma resistance. The volume declined nicely throughout the congestion and created a buy setup as the resistance gave way.

The Dow and S&Ps both moved strongly higher as the afternoon progressed, but the Nasdaq lagged as a result of continued weakness in the tech sector. Oracle Corp. (ORCL) and Palm Inc. (PALM) both had a tough session following their earnings reports. Intel Corp. (INTC), Dell Inc. (DELL), and Research In Motion Ltd. (RIMM) also closed lower, even though they managed to pull up off the mid-day lows. The Morgan Stanley High Tech 35 Index ($MSH) lost 0.3% on the day, while the Nasdaq Composite ($COMPX) as a whole fell 0.2% (6.02 points). The Philadelphia Semiconductor Index ($SOX) was particularly hard-hit, falling 1.4%, or 6.73 points with losses in PMC-Sierea Inc. (PMCS), Texas Instruments Inc. (TXU) and Micron Technology Inc. (MU).

The market found resistance near 14:00 ET as the Nasdaq retested morning highs and the S&P 500 and Dow hit their 5 minute 200 simple moving averages. A gradual correction along the resistance was accompanied by declining volume, similar to the action that led to the initial afternoon breakout. This helped the indices move to new intraday highs in the last hour of trading. With this move the Nasdaq was finally able to close its morning gap, while the Dow continued to out-perform and made its way back into the zone of its record highs. It even managed another record close at 12,471, a gain of 30.05 points from the prior day. The S&P 500 rose 3.07 points, ending the session at 1,425.

I do not have a very strong directional bias in the market at this time. The more rapid upside Tuesday afternoon will make it easy for the indices to continue to trade within a range on the 120-minute charts. For a strong breakout from this range I would expect the market to begin to favor one end of it with volume declining throughout. This could easily take a couple of days. Since we are soon to head into an extended holiday weekend, it would not be a surprise if this does not occur until next week since trading will typically begin to slow after tomorrow's session.

Economic Reports and Events This Week
Monday: Current Account for Q3 (8:30 am)
Tuesday: Housing Starts, Building Permits, PPI, and Core PPI for Nov. (8:30 am)
Wednesday: Crude Inventories 12/15 (10:30 am)
Thursday: GDP-Final for Q3 and Chain Deflator-Final for Q3 (8:30 am), Initial Claims 12/16 (8:30 am), Leading Indicators for Nov. (10:00 am), Philadelphia Fed for Dec. (12:00 pm)
Friday: Durable Orders, Personal Income and Personal Spending for Nov. (8:30 am), Mich. Sentiment - Rev. for Dec. (10:00 am)

Key Earnings Announcements This Week
Monday: JOYG, SCS, APSG, FCEL, HOV, and ORCL
Tuesday: CC, FDS, MCS, MS, SCHL, CHAP, CBK, CTAS, DRI, FSII, PALM, and SMOD
Wednesday: AIR, ATU, BMET, KMX, FDO, COMS, ACN, APOG, BBBY, COGN, FINL, MLHR, NKE, and PAYX
Thursday: AGE, AM, CCL, CMC, CAG, GIS, NOBH, RAD, SMSC, WOR, EGLS, RHT, RIMM, RECN, SHFL, SLR, and TIBX
Friday: No companies are scheduled to report.
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance and Briefing.com. Occasionally changes will occur that are made after the posting of this column.