Good day! Heading into the evening on Tuesday the market was still looking great for rounded highs and hence the room for some stronger downside moves. I was hoping, however, that we might see one more tiny higher high to make it even more of a trap to favor some stronger shorts as opposed to just one swift downside move or a series of choppier smaller downside moves. From the early premarket trading, however, it became rather obvious that we were not going to see that one last push. Instead the indices had another larger than average downside gap. Again though, since this was not the first such gap in a row and was instead the third gap of its kind in a row, it was nearly impossible for it to fill or even attempt to.

After the gap lower, the market found itself subject to a lot of overhead resistance on the 5 and 15 minute time frames with moving average as well as price resistance from lows over the previous two days. The result was that the market held the opening levels almost exactly and then weakened further out of the gate. A downtrend was instigated right away, but each of the waves of selling were broken by much larger corrections off the lows than is typical for most downtrends. Off the 11:00 ET reversal period for instance, the market bounced right back into the previous breakdown level and then the market again moved higher out of 12:00 ET after only a moderate move down, the indices held the previous highs and then broker lower once more. I focused on the NQ (Nasdaq Composite EMini) at this time because it had an obvious lower support level that was acting as a magnet. It was the 30 minute 200 simple moving average and hit perfectly just ahead of 13:30 ET.

The market headed up once again out of 13:30 ET and at a pace that was not much different than earlier. When the 5 minute 20 sma and previous highs hit on the earlier moves the market bounced right off those resistance levels. This time around, however, despite hitting at the 14:00 ET correction period, the market simply could not shake the resistance and instead hugged it in reaction to the resistance and correction period instead of reversing off it. This created an upside breakout into 14:30 ET even though the momentum had not turned over enough to sustain a strong upside move and the larger time frames remained more bearish. A similar third move on the 5 minute off the lows broke higher around 15:15 ET before pulling a bit lower again into the close. This afternoon correction now leaves the door open for a third move lower on the 30-60 minutes charts on Thursday and this will be my bias heading into the morning.







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.