Good morning! Volume was strong in Tuesday's session, but the market was all over the place. When I begin my day the first thing I do in the morning is scan through the premarket gainers and losers. These will tell me what type of momentum potential we have for the session as a whole. Then, shortly after the open, I will scan through all of the top intraday gainers and losers that have the strongest trading out of the open. On the best days these lists will tend to have a plethora of well-known and well-followed names and there will be a number of popular stocks on both sides. On Tuesday this was not the case. Many of the stocks that habitually make these lists were missing and a lot of the names which did show up were more thinly traded stocks, particularly in the Nasdaq.

Due to this lack of momentum in individual stocks, I had a very difficult time finding things to trade. I like to see stocks which have setups on multiple time frames. In other words, I likely won't short a stock which has strength on a larger time frame unless the trend is severely exhausted and vice versa. Most of the stocks I came across at the open that did catch my eye on the daily charts for potential intraday continuation never gave decent setups intraday on Tuesday. Since I prefer not to scalp in stocks unless it at least is going to give me a 50 cent move, I found myself rather bored before long.

Even when I went back after the close and poured through the day's action I found very few things that I wished I had seen during the day and had missed since most of the gainers at that point had either been because of initial upside which then fell flat for the remainder of the day or else they just climbed steadily throughout the session like ETN. Most of these that did move, however, did so without a great daily chart and without strong intraday continuation setups that would not get you killed if you tried them on every stock you came across. By the end of the day I was so bored I literally fell asleep and completely missed the last two hours of trading which is kind of funny because I am NOT a nap person. At least it's good thing I don't have a boss to answer to! On the plus side though, there was some decent action in the indices as a whole and this allowed me to still manage to finish ahead despite my lack of stock trades.



When the market opened on Tuesday the indices experienced a marked decline since the previous day's close. The opening prices were at support from the previous day's lows in the S&P 500 and the Dow Jones Industrial Average and Friday's morning congestion in the Nasdaq Composite, however, and this forestalled further selling initially. Instead the market bounced for a bit out of the open, closing a good chunk of the gap before hitting resistance around 9:45 to 9:50 ET. The rally had taken place on declining volume ever since the open and this made it easier for the indices to turn back around as the morning progressed. By 10:15 the three major indices were coming into new intraday lows and were now having to deal with support levels from Friday on all three, having strongly cleared Monday's lows.



The increase in momentum on the mid-morning selling gave the indices very little chance to gain strength when they tried to bounce into 10:30 ET. I had caught the YM on this initial attempt to move off support, but was forced to scalp it for only small gains before the indices moved lower again into 11:00 ET. This was too early for a solid bear flag, which should have at least hit the 5 minute 20 sma, and ideally the 15 minute 20 sma given the extent of the selloff into the earlier lows. The result was a 2B reversal pattern where the indices established a very slightly lower low on this form of a double bottom and it created a change in momentum that then allowed for a stronger reversal into mid-day.



The market climbed steadily throughout the remainder of the morning. It eventually ran into resistance at the 12:00 ET reversal period when the indices hit their 15 minute 20 simple moving averages intraday and the 15 minute 200 simple moving averages on the all-sessions charts (which include the afterhours data). The strong combo of resistance levels and the reversal period led to a correction off the highs going into the early afternoon. Due to the larger intraday resistance, it seemed likely to me that the 5 minute 20 sma support would break on the pullback, but I never saw any conviction coming into the selloff so I just sat it out and waited. Following the 13:00 ET reversal period the market did find a foothold again when the gradual pullback along the 15 minute 20 sma broke through the resistance for a second wave of intraday buying on the 15 minute charts.

As in the morning rally, the momentum in the afternoon on the upside was steady and it led to a nice equal move on the 15 minute charts before also hitting price resistance from the previous session at the 14:00 ET reversal period. Even though the morning reversals trailed the reversal periods by about 5 minutes, the market held the afternoon ones perfectly and the market again began to correct out of 14:00 ET. This is about when I called it a day since I had not expected as strong of a reversal off the highs as we ended up getting. I found nothing in my scanning that caught my attention and figured that the momentum on the buying in the indices would hold off any strong reversal and the market would instead get stuck between the highs and the 15 minute 20 sma support for most of the remainder of the day.

Had I waited just a few minutes to monitor the reaction to the market resistance it would have been obvious that was not going to be the case. The turnaround gained momentum on the downside immediately and reacted little to the 5 minute 20 sma which was the initial support. A series of small bear flags ended up taking the market lower into the close. By the end of the day all three indices had given back all the gains they had recouped since the open and the Dow ($DJI) closed lower by 129.95 points, the S&P 500 ($SPX) fell 16.1 points, and the Nasdaq ($COMPX) lost 22.4 points. Since the market was unable to bust through the 10 and 20 day simple moving averages we were keeping an eye on yesterday, it diminishes the odds for a triangle on the daily charts at this time and instead favors a break in the 50 day sma with the next main support at the 100 day sma and early April trading levels if last week's lows can give way within the next couple of sessions.

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.