The market was all over the place as we kicked off the new week. Mondays can often be a bit more hesitant and this time around there was again a very discernible difference in market strength. The Dow Jones Industrial Average ($DJI) rallied from the start with a modest upside gap into the open. The intraday trend was ugly, but the Dow managed to add 92.34 points (+0.7%) to close at 13,943 with 22 out of 30 securities advancing on the session. AMR Corp (AMR) (+1.96), Merck (MRK) (+3.31), Procter & Gamble Co (PG) (+1.19), and Exxon Mobil Corp. (XOM) (+1.50) were among the top leaders. Conway Inc. (CNW) (-2.02) and Hunt JB Trans Svcs. Inc. (JBHT) (-0.87) were two of the top percentage losers in the index.

The S&P 500 and Nasdaq Composite did not fair quite as well. The S&P 500 ($SPX) added 7.47 points (+0.5%), but the Nasdaq Composite ($COMPX) only managed to tack on 2.98 points (+0.1%). A number of stocks moved strongly on the day on merger and acquisition news. The biggest of these was news from Transocean Inc. (RIG) and GlobalSantaFe Corp. (GSP) that they were now planning to merge. Additionally, United Rentals Inc. (URI) announced their buyout by Cerberus and Hewlett-Packard Co. (HPQ) is purchasing Opsware Inc. (OPSW), which makes automation software. A larger mover was Tellabs Inc. (TLAB) (+3.0%), gapping and moving higher by as much as 15% into the open when it became known that it was a potential target for a buyout by Nokia Siemens Networks. It was unable to hold most of those gains, however, and sold off steadily throughout the session.



Even though I found a couple of really nice setups intraday on Monday, I also found it very difficult to stay motivated and mainly ended up flipping through what I considered to be garbage as I was scanning for intraday setups. The indices themselves split right away out of the open with the Nasdaq opening into Friday's afternoon highs and the S&P 500 opening right at its 15 minute 200 simple moving average resistance. The Nasdaq reacted very sharply to this resistance and closed the gap within only about 15 minutes. It then based into 10:00 ET and fell back into Friday's late day lows. The S&Ps did pull back a bit as well, but didn't even come close to closing its gap, instead hitting support at the 5 minute 20 sma at the same time as the Nasdaq was finding support. The Dow was stronger though, and it held the zone of its first 15 minute lows even when it retested those lows at about 10:10 ET.

Once of the strongest trends intraday in the market began when the market reacted to this mid-morning support. After a small 15 minute bounce, congestion set in. When this broke, however, out of 10:45 ET, the momentum increased a great deal. The Nasdaq had managed to move all the way back to its morning highs about 10 minutes later and the Dow and S&Ps were breaking to new intraday highs. The resistance then hit at the 11:00 ET reversal period and the volume, which had not been particularly strong to begin with, declined steadily into mid-day.



Over noon on Monday the volume was back to levels similar to Thursday's mid-session trading and a similar market reaction resulted. The indices rounded off a the highs with more gradual upside and more rapid downside within the range before it finally broke lower out of the 13:00 ET correction period. A second wave of selling on the 5 minute time frame followed into 14:00 ET that dropped both the S&Ps and Nasdaq back into zone of the morning lows. The Dow hit support at the same time at its 5 and 15 minute 200 sma zone and the indices were able to establish a pivot that led to a retest of the highs in the Dow. The market turned back around once again despite the attempt at stronger upside momentum and another two waves of selling took the indices back into the previous 5 minute support at lows before the closing bell.



I don't have a strong intraday bias into Tuesday. My intraday strategy is going to depend a great deal upon what happens into the open. A larger market correction would have been better off had the indices, particularly the Dow, not pulled up quite as much intraday on Monday. Right now we have a trading range in play on the 60 minute time frame, but it lacks a strong breakout bias. The S&Ps and Dow are looking a bit more bullish thanks to the narrow intraday range along the 60 minute 20 sma, but the Nasdaq more bearish on that time frame due to the rounded highs.

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.