The market was significantly stronger on Tuesday than I had anticipated heading into the session. I figured that the congestion would continue for another couple of days before the breakout would occur, but instead the indices began to move higher right away out of the open with the Nasdaq leading the way into this shortened trading week. The Nasdaq quickly moved through Friday's highs, but the S&P 500 and Dow Jones Ind. Ave. both had to deal with the price resistance from those levels before they could continue. The Dow hit those highs soon after 10:00 am ET and based at that level until 10:30 ET before breaking through them. The S&Ps, however, lagged by quite a bit and stalled on the upside at the 5-minute 20 simple moving average.

As the market continued to climb throughout the morning, it broke each previous intraday high by a lesser degree than before. This created some rounding off at highs on the 5-minute time frame and when the S&PS finally hit Friday's highs, that slowing uptrend broke its lower trend channel. I shorted the ES break around 11:45 ET, but the market failed to gain any momentum to follow through on this setup. After hitting the 11:00 ET price support the market again pulled back up into the zone of the morning highs. Then shortly after 13:00 ET the highs broke with a rapid flush into new intraday highs.



The market continued to trend higher throughout the remainder of the day. The trend was not an easy one to trade if you are used to daytrading pullbacks and breakouts, since a great deal of the move higher experienced only slight corrections and crept slowly to the upside with a lot of overlap from bar to bar on the 5- and 15-minute time frames. I really dislike this type of trend move, because while it is wonderful if you are a swingtrader or trade off the larger intraday time frames such as the 60- or 120-minute chart, they are not nearly as much for an average daytrader.



Upside moves such as that which took place in the overall market on Tuesday afternoon easily give way to strong flushes on the downside and it can often be difficult to tell exactly when that move will begin. This made me very hesitant to be aggressive on the long side in the final hour of trading. This flush finally began around 15:35 ET and the market dropped sharply into the close, continuing lower afterhours.

On the plus side, while the indices were a bit more difficult for me, there were a number of individual stocks which performed exceptionally well. The ones I focused on included Vasco Data Sec Intl. Inc. (VDSI), Freeport-McMoran Copper & Gold (FCX), Wynn Resorts Ltd. (WYNN) and Morgan Stanley China Fd (CAF) on the upside.



By the end of the day on Tuesday the Dow gained 91.1 points (+0.68%). It was led by GM, which rose 3.8% after posting a large increase in light vehicle sales in the U.S. for this past month. Home Depot was the largest Dow loser. It fell more than 5% after announcing a buyback of nearly 3 million shares at $37. The S&P 500 did better, rising 15.43 points (+1%), while the Nasdaq gained the most in terms of percentage, gaining 1.3% or 33.88 points. Now that the Nasdaq has broken most of its upside resistance levels, it will be easier to retest the highs from July this week. The S&P 500, however, will first have to deal with August's highs, which would likely correspond to the Nasdaq's July 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.