Good day! Following yesterday's analysis of both the intraday looking to head higher, but the daily charts looking pretty extended, the market took care of both biases. The day began with a bit of chop, but going into 10:00 ET the market was heading to new intraday highs, breaking the prior afternoon's resistance after pivoting off support on the 15 minute 200 sma on the all sessions futures charts. The pace was very strong, rallying into the prior day's highs where the indices stalled for a few minutes before continuing higher into the 10:45 ET reversal period.

The pace of the rally to highs made it likely that the correction would start out a great deal more slowly. Despite the slower pace than the rally though, the pullback was still very nice, moving quickly into the 5 minute 20 sma support. Here we saw the NASDAQ hug the support, creating an Avalanche pattern coming out of a 5 minute Head & Shoulders. Aside from the initial pivot into the open, this was really just the second decent pattern setup of the day on the 5 minute charts. It triggered ahead of 12:00 ET and hit an equal move target very rapidly, only to keep going after just a few minutes to make it all the way back to support at the morning lows.

The mid-day descent picked up enough pace to turn over the market to the favor of the bears. The correction from lows at the NASDAQ's 5 minute 200 sma was very slow, hugging the support level. This made it likely that we'd see a break down from the range into the afternoon. The first chance was a bounce off the 5 minute 20 sma, but this held and the market continued to drift higher. As the initial channel broke lower in the NASDAQ I took a short around 15:00 ET in anticipation of a greater breakdown since the NASDAQ was holding the 15 minute 20 sma resistance and volume was light on the rally. It took into the close and after-hours though to really see any results after CSCO announced. Not wanting to get stuck in it going the wrong way quickly, I had closed half my position with very small gains but the drop in the after-hours managed to bring the market into new lows for the day in the NASDAQ.

On Wednesday I think we'll continue to see the market correct off the highs made already on the week. There is not much for resistance though on the daily charts aside from the range where the NASDAQ had broken down earlier in the year. As a result, with pace on the upside also very strong in the Dow Jones, I will again be watching for intraday setups. For continued selling, I am watching VRTS. For swing shorts I want to see no immediate resistance, a nice solid base at daily lows on light volume while the market has been moving higher. Then, to help lower risk, look for an intraday base at lows as well.

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.