The market opened strongly higher again on Thursday, but it's been a tough road for the bulls. Despite the strong open, the market has been moving upward for a number of days and after such a sharp decline just a week ago, it's been hard to maintain strong upside momentum. While the market has given us the gains we were looking for, on Thursday they failed to hold onto those gains. Right away after the gap higher things began to sell off.

The first support in the market hit at the 5-minute 20 simple moving average in the Nasdaq Composite and S&P 500. While this stalled the sellers, it provided very little relief and before long the market was again heading lower. The Nasdaq led the bears, giving up its recent relative strength. It broke down out of 10:15 ET, while the S&Ps and Dow Jones Ind. Ave. managed to hold those lows.



At about 11:00 ET all three indices did give way to stronger selling, breaking to new intraday lows and then continuing only 15 minutes later into about 12:00 ET. At this point the market was coming into even stronger support. This was the previous day's lows in the Nasdaq and the 5-minute 200 simple moving average in the S&P 500. The Nasdaq displayed the greatest correction off this support, but it failed to gain momentum as compared to the previous selling and the volume remained on the lighter side as compared to recent activity.

Before long the market was again testing lows. These hit at the 13:00 ET correction, and it was this support which held throughout the remainder of the day. The 13:00 ET lows hit at about the same time as the previous 15-minute lows in the S&P 500 and the 5-minute 200 sma in the Nasdaq Composite. Support from the prior lows in the Nasdaq also remained in play at this time.



The morning's decline was not an idyllic one. There was a a great deal of hesitation and second guessing throughout the move and I lost a bit of money trying to play support given that the support levels generated very little upside or corrective action before giving way to further selling. Even after bouncing at noon, the market had a difficult time holding onto gains and the upside.

When the 13:00 ET correction period hit and the market headed higher, it rallied very sharply, but still could not bust through the morning congestion which took place earlier in the morning. Those levels served as resistance and soon after 14:00 ET the market was again heading lower with some decent strength. It was not significantly greater momentum than the previous selling, however, and hence not as important from a contract perspective. The remainder of the day held this congestion and neither the bulls nor the bears could sway the indices in one direction or another for more than a daytrade or scalp move.



Even though the market had a tough time on Thursday, the odds are still favoring more upside. Of course, the further it goes, the more hesitant I become. The indices are starting to come into some strong resistance from earlier in the month and I am not excited about those price levels. Typically, when an index or security returns to a prior zone of congestion they will not break it, but rather base and break it later. I want to be very on guard at this point, since it would not take much to move things in either direction, and I do not want to be locked too strongly into one bias over another now.

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.