Good morning! Stocks moved higher on Tuesday with the Dow Jones Industrial Average gaining 128 points, the S&P 500 up 13 points, and the Nasdaq Composite higher by 28.07 points by the closing bell. All of this buying, however, had already been established by the 10:45 ET reversal period. The market had gapped strongly higher into the open, right at Friday's highs in the Dow and at the previous day's highs, but just under the 15 minute 200 sma in the Nasdaq. The interaction between the support and resistance levels at the open, combined with the larger gap, led to a correction out of the open. The market based along the highs for about 30 minutes, awaiting any secondary reaction following the 10:00 ET homes sales data.

The market had been holding its breath out of the open, but finally exhaled when the National Association of Realtors said that its pending home sales index rose 0.7% in February. This accelerated the buying and followed through with the bullish intraday bias the market was favoring heading into the day after the momentum changed coming off the lows in Monday's session. The market took off for a few minutes and then based again for another continuation move that broke higher into the 10:45 ET reversal period. At that point the market was coming back into resistance from the highs of the daily congestion from two weeks ago and when the market corrected this time around the pace increased slightly on the downside. It took the indices into the 5 minute 20 sma and the support held well.

For the remainder of the session things were fairly inactive. The S&Ps and Dow did pop higher for a few minutes around 13:30 ET, but the move was short-lived and the bears quickly retook the 5 minute 20 sma support level and middle of the day's range at highs. This hit at the same time as the 15 minute 20 sma and the market began to form an Avalanche pattern heading into 15:00 ET on the 5 minute charts. Unfortunately, even though the market did move very slightly lower, they were unable to put in any decent afternoon move and just chopped around a great deal throughout the entire afternoon.







I am expecting the market continue to slow down over the next two day as a result of the upcoming three-day weekend. Should the market be able to break these current highs, the next strong resistance is the closing price from February 26. I'll be out of the office until Monday, so I will not be releasing a focus letter tomorrow ahead of the holiday weekend, but will be back on Monday, so happy trading!

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.