The market on Tuesday was one of those days where anything goes. There were a lot of stocks heading lower, a lot heading higher, and many just looking at each other confused and shrugging their shoulders. Despite the lack of strong bias, there were a number of really great setups on the day, particularly in the afternoon. Many well-known names made the gainers and losers lists, which is always a good sign for ample opportunities.

The top stocks to start the day were Novellus Sys. Inc. (NVLS), Sandisk Corp. (SNDK), and LAM Research Corp. (LRCX). The semiconductors as a whole had a stellar session. NVLS had beat second-quarter earnings and revenue and KLA-Tencor Corp. (KLAC) later soared when it announced early in the afternoon that bookings for the quarter rose by more than 2%. VSEA, LKQX, VCLK, FORM and GMKT were the other major Nasdaq players. Top stocks on the NYSE included AXP, ROH, CIB, DHR and LEA.



The indices climbed higher right out of the gate on Tuesday as earnings news drew the bulls back into the fray. All was not peachy, however, and some of the popular stocks lately, such as NYX and ICE were having a more difficult time holding up. When the Dow ($DJI) finally smacked into the 14,000 level, the bears were able to take the lead briefly and the market pulled back into the opening price zone. This price level hit at the same time as the S&P 500 and Nasdaq Composite hit the previous day's highs. Even though the drop was on the strong side in the S&Ps and Nasdaq, it was not extreme and the support level held well, corresponding to the 5 minute 20 period simple moving average and the 10:15 ET correction period.



The indices fell into a trading range on the 5 minute time frame throughout the remainder of the morning. Volume declined and the upside momentum slowed compared to the earlier selling. This created a bearish bias into noon. Market volume hit its lightest levels of the day as the 12:00 ET correction period approached. The S&P 500 was showing the weakest performance by hugging its 5 minute 200 sma, while the Dow and Nasdaq Composite each formed 5 minute Avalanche patterns as they hugged the 5 minute 20 sma within a larger Head & Shoulders pattern on the same time frame. When the moving average gave way it triggered a short which slid the indices lower mid-day.



The S&Ps experienced the greatest decline into the afternoon, breaking through the 5 minute 200 sma and 15 minute 20 sma. Within 30 minutes the S&Ps were back at previous 15 minute lows. At the same time as the S&Ps were finding support, the Dow and Nasdaq both had established equal moves on the 5 minute time frame as compared to the 11:00 decline and were retesting the 10:15 ET price support. The combination of support levels across the broader market created a mid-day pivot low that ended up holding throughout the remainder of the day, although this was barely the case in the Dow and S&Ps.

The momentum began to pick up almost immediately in the indices on the upside, but slowed with minor congestions into 13:30 ET at the 5 minute 20 sma resistance. When that resistance level broke, however, the bulls swiftly regained the lead. The Nasdaq gained the most strength and soon it, as well as the Dow, were making new highs. The S&Ps, which were under greater pressure throughout the mid-day, provided the resistance levels that would stall the rally in all three indices. This hit first at its 11:30 ET highs and then the S&Ps high of the day at about 14:30 ET, which completed three waves of buying and hence exhausted the afternoon uptrend. In the Nasdaq this level of resistance was also the 15 minute equal move (shown in blue).

By the end of the session the Dow Jones Industrial Average ($DJI) rose 20.57 points and closed at 13,971.55, a record closing high. The S&P 500 ($SPX) barely moved, losing 0.15 of a point to end the session at 1,549.37. The Nasdaq Composite ($COMPX) had the largest percentage gain, rising 15.68 points to close at 2,712.29.

Not a lot has really changed since yesterday. The indices are still trying to round off at lows, but still lacking any confirmation for a change in momentum to favor a breakdown. I do still favor a greater correction off the high zone this week, but I am going to still just stick to following the intraday action for guidance on short term trades. It will still be relatively easy for the market to give way to sharper intraday declines, such as those in the S&Ps on Tuesday and all three of the indices on Monday afternoon.

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.