The market managed to close modestly higher on Tuesday after a slow session heading into the day's FOMC statement and large whip-saw action following the announcement. All-in-all it was a rather typical Fed day. The morning began with a small downside gap into the open, but the 5 minute 20 simple moving average held it and the indices crept higher until the gap zone had closed. This took place shortly after 10:00 ET and the indices then fell back and sideways as the volume began to dry up. This made it difficult to do much with the index futures since choppy trading set in and the upcoming Fed announcement meant that the closer the day came to that announcement, the higher the risk would become.

Even though the market as a whole had a really difficult time to start the day, moving only slightly higher, a number of individual stocks had some nice momentum, creating a number of strong opportunities in individual stocks. Among those stocks which did trend pretty well intraday on the upside were NILE, NOV, DE, MR, OII, GES, FMCN, ELON, JASO, OMTR and EQIX. A problem many traders I talked to had, however, was that many of the gappers didn't really go very far after the open and just chopped around instead, so they got cut up a bit. One thing to watch out for when you are trading stocks gapping on news is to avoid those which ran for several days before gapping or are gapping and moving right into a 20, 50, 100 or 200 day sma. Those levels are more likely to hold the first day they are hit on a reversal or correction.

The indices split heading into noon. The Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) both broke higher out of the 15 minute triangle than began with the previous afternoon's highs. The Nasdaq Composite ($COMPX) had pulled back more and failed to react as much off support. While the Dow and S&Ps managed to climb into noon, the Nasdaq could not bust through its morning highs and the 15 minute 200 sma that was hitting at the same time. The 12:00 ET reversal period corresponded to this resistance and the S&Ps also hit equal move resistance in that zone. This led to a second correction off intraday highs into the early afternoon.

Support hit on the second pullback at about 13:00 ET. This was the 5 minute 20 sma again in the Dow and S&Ps. Volume was now even lighter. The financial sector really began to take off at this time with the Fed only about an hour away. As they soared, the market as a whole slowly climbed. It hugged the 5 minute 20 sma zone, however, and this was a strongly bearish indicator since it was the third move higher on the 5 minute time frame. This meant that the trend was also exhausting itself going into the Fed.

After the Fed announcement hit with no change in rates, we saw the typical three wave reaction. First the market dropped, popped and dropped again on a 1 minute time frame. It then repeated on the 2 minute. This was the easiest to see in the Nasdaq. I had a lot of charting issues after the Fed, as did many I spoke with, whereby many of my charts lost data. It didn't affect how the market reacted, however, and before long the indices were beginning a second wave on the larger 5-15 minute charts by turning around off lows around 14:35 ET with a pattern very similar on the 5 minute of the Nasdaq as compared to the move off Monday morning lows. Resistance hit at 15:00 ET, but then the buying continued into 15:30 ET before pulling back into the close. The Dow ended the session with a gain of 35.52 points, while the S&Ps rose 9.04 points and the Nasdaq Composite gained 14.27 points.

Going into Wednesday I think we are going ton continue to see the market react off the lows of the last couple of weeks, however the momentum coming out of Monday's low is slower than it was heading into it. This leaves the door open to pull back on Wednesday since the pace would ideally need to turn over better with more gradual downside before we would normally see a strong upside momentum move or correction off support. This means that while I expect longer corrective action off this recent support, I think it's going to continue to be a bit more difficult for now with greater chop.







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.