Good day! The market provided some pretty nice opportunities on a daytrade time frame on Tuesday as we kicked off this abbreviated trading week, even though overall the indices continued to hold the trading range and slowdown that began earlier this month. Tuesday's session began with a nice upside move out of the open to provide that continued momentum move we were looking for heading into the day. The move came to a halt after the 10:00 ET consumer confidence data came out. The consumer confidence index rose to 108.0 in May after hitting 106.3 in April. Expectations had been for a reading of 105.8. The immediate result was a strong surge in buying that took the indices to new intraday highs and back into the upper end of the daily trading range.

The euphoria brought about by the 10:00 release, albeit significant in terms of momentum, was short-lived. The average confidence reading from Dec-Feb had been 110.4. All the momentum managed to accomplish was to exhaust the trend move that had been under way since Friday. The remainder of the morning was spent correcting from that move. The Nasdaq, which displayed the greater relative strength agan on Tuesday, had a nice little triangle scalp buy setup around 10:30 ET. The previous spike and the amount of correction off that spike prevented the index from breaking the prior highs, however, and the market pulled back off highs again at 11:00 ET.

As the market continued to adjust following the morning rally, the momentum began to shift. The 11:00 pullback was a a bit stronger than the previous 5 minute bounce out of 10:30 ET and then the Nasdaq began to hug its 5 minute 20 simple moving average. It attempted a third wave of upside within the triangle forming on the 5 minute time frame. This created a strong short pattern in the indices as the Dow, Nasdaq and S&P 500 all broke lower from the morning triangle patterns. It completed the momentum shift and gave favor once more to the bears. This first decline slid the market lower into 12:30 ET. A nice bear flag into the 5 minute 20 sma resistance followed and completed the day's retracement with a drop into the S&Ps 30 minute 200 sma support and price support from the middle of the congestion from Friday.







The market had numerous strong buy setups in the morning, particularly in NYSE issues such as MA, WNG and BRE, but when it rolled over I had a more difficult time identifying clear-cut short patterns other than in the indices themselves. A lot of stocks did form some low level bases early on in the reversal, but most were on the choppier side and since the indices had been strong early on it meant that many of the top mid-day decliners never even showed up on my scans until the moves were well under way. They had held up fairly well earlier in the session, or at least had only posted some minor losses, only to succumb to selling as the market reversed. A number of these had also hit new 52-week highs in just the past week or two, which can make them more difficult to locate on the short side.

By 14:00 ET I was getting quite bored scanning through the same things over and over that were showing up in my scans but lacked strong setups. The market by that time was coming into some strong support levels, but doing so at a pace that would make a rapid reversal more difficult to begin with. I was hoping to see a 2B pattern form as a type of double bottom into 14:30 ET to allow for some stronger momentum to come in on a bounce into the close, but instead the indices formed a rather sloppy Phoenix pattern along the 5 minute 20 sma resistance at that time and when the resistance broke higher the trend move was steady, but very choppy. My bias is again going to be on the more bullish side heading into Wednesday, but once more the highs from last week are going to remain as resistance and the risk is still present that we will continue to see rounded highs on the indices on the weekly time frame. By holding up fairly well on Tuesday though, it will be easier for the market to take another stab at new highs even though the overall pace is still slowing and rounding off and can continue to do so even with another new high heading into summer.

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.