The market's momentum took a bit of a turn on Monday, kicking off the new trading week on a somewhat bullish note intraday, even though the daily time frame is still under a lot of strain. The Dow Jones Industrial Average ($DJI) regained 92.84 points, closing at 13,358.5 after 24 of its 30 stocks posted gains. One the largest was General Motors Corp. (GM), which climbed 1.51 points, or +4.9%, ahead of its Tuesday earnings announcement. The S&P 500 ($SPX) rose 14.96 points on Monday and closed at 1,473.90. The Nasdaq Composite ($COMPX) gained 21.04 points and it ended the day at 2,583.3.

A lot of the intraday trading on Monday was actually pretty sloppy. The session began with a great deal of hesitation as the indices moved in for a stronger test of the daily moving average support levels. The S&P 500 pulled back to its 200 day sma in the last two sessions, while the Dow settled at its 100 day sma, and the Nasdaq Composite slid into its 50 day simple moving average.



After the sharp return to lows in Friday afternoon, it took the market awhile to begin to show any real recovery. Extreme momentum moves tend to correction with slower and choppier ones. We experienced this on Monday morning as the indices climbed off the lows beginning around 9:45 ET. All three indices made their way into their 5 and 15 minute 20 sma zones going into 10:30 ET following this early morning pivot. Along the way they chopped back and forth within the trend channel on the 1-5 minute time frame and broke that channel lower with another quick, albeit brief move, into 10:45 ET.

A second drop on the smaller intraday time frames came out of the 11:00 ET reversal period after volume declined as the indices played around with the 5 minute 20 simple moving averages. This time it wasn't quite as much of a move as the first though. When the third move within this small 1-5 minute trend came at about 11:30 ET it barely breached the previous low, creating a bit of a trap and reversal pattern that took the market higher on stronger momentum into noon.



On the 15 minute time frame the change in momentum on this second decline into the daily support intraday is very noticeable. Nearly every bar on the 15 minute charts overlaps most of the price action from the previous bar. The volume decline also indicates that the selling pressure has dried up. After popping to the upper end of this congestion, the indices then hugged the 5 minute 20 sma into 12:30 ET. This was again on declining volume and it triggered the perfect buying opportunity for index traders, as well as setups in a number of stocks which had undergone similar price activity throughout the morning. My entry came at 12:25 ET in the NQ (Nasdaq EMini) at 1969.50, which was essentially the 5 min channel break along the 20 sma.

The first wave of buying following the intraday reversal on Monday was the largest one. It took the indices back into the intraday highs much more quickly than they had fallen from them. That price resistance then led to a two-wave pullback into the 5 minute 20 sma, which had been resistance, but was now support. Light volume on the decline again favored the bulls and the market turned back around for a second wave of upside on the 5 minute charts going into 14:00 ET. This reversal period hit at about the time as the 5 minute 200 sma zone in the S&Ps and Nasdaq to create a second correction in this new trend going into 14:30 ET.

That second rally in the indices did not quite have the extension of the first and, as in the morning's decline into 11:15 ET, this meant that a third upside move would likely break the previous highs of the trend by an even lesser amount than the last. The S&Ps and Dow still did pretty well, even though there was a bit more overlap in prices on the 5 minute charts, but the indices hugged the 5 minute 20 sma support longer before pulling up off it and broke free to a lesser degree than the previous two moves.

This third move not only completely another trend set, but also took the indices back into the strong price resistance from the zone of Friday afternoon's highs and the 5 minute 200 sma in the Dow intraday. The response was a rounding off at highs on the 1-5 minute charts and a pullback into the final hour of trading whereby the 5 minute 20 sma support gave way.



Some of the largest winners on the day on Monday included FPL Group, Inc. (FPL), which rose 5.2% after posting second-quarter earnings growth, NewMarket Corp. (NEU), which also rallied on earnings, and First Solar Inc. (FSLR), which climbed ahead of Tuesday's earnings. MNST, GRMN, ISRG, GYMB, SPWR, FCX, IR, MA, TEX, UA, and SPW also moved strongly higher.

The top decliners on the day included the likes of Dow Jones & Co. (DJ) on news relating to the sale of shares to News Corp. (NWS), Jarden Corp. (JAH), which dropped following earnings, NovaStar Financial (NFI) after the announcement of a 1-4 reverse split, RadioShack Corp. (RSH) following earnings, and ValueClick Inc. (VCLK), which released weaker-than-expected earnings. AAPL, AMZN, BIIB, SAFM and NTRI also lost more ground on Monday.

As the week progresses, I believe that we will continue to see the market react to the recent support, but the bulls are going to be wary. There is a general mindset to buy pullbacks in order to add to positions, but while that worked well in February, many of the market leaders are a great deal more extended now and are showing signs of larger corrections on the monthly time frames and not simply on the daily charts. The zone of the previous highs will serve as significant resistance. As such, I am not currently favoring many new position trades or investments as longs right now and have been continuing to focus primarily on intraday activity with just a few overnight holds.

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.