The market has had an easier time attracting more attention on downside moves than upside move recently where the volume has been on the lighter side, such as on Monday. This continued into Tuesday's session as well. The Nasdaq Composite ($COMPX), which had led the gainers on Monday, opened relatively unchanged, while both the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) gapped slightly higher thanks to strong premarket data which erased earlier losses.

At 8:30 am ET, the Labor Department reported that import prices rose 1.8% in April, in line with expectations. The primary instigator of the premarket rally, however, was April's retail sales data. Retail sales, excluding motor vehicles, climbed 0.5% for the month, beating expectations for a 0.2% gain. The market popped quickly higher on the news, although the positive reaction lasted for only about 30 minutes before the index futures began to shift and turn over at the highs.

Dow Jones Industrial Average ($DJI)


By the opening bell the market was down from premarket highs, but those highs corresponded to strong resistance levels. The ES (S&P 500 EMini) had retraced to the 62% fibonacci level (based upon the correction off last week's highs) into the opening bell, which held very well. The Nasdaq also opened right into price resistance from the highs of the previous week as well as Monday. The downside was immediate following the opening bell, but it was again led on the Dow. The S&Ps followed closely behind, but the Nasdaq merely crept lower while the other two indices experienced strong downside momentum early in the session.

Support hit initially at the 10:15 ET correction period. This triggered a nice scalp back up into Monday's highs in the Nasdaq, but the Dow held its 5 minute 20 period simple moving average and formed a bear flag out of the 10:45 ET correction period. This time the Nasdaq played along and all three of the major indices fell sharply to new intraday lows into the 11:00 ET correction period.

S&P 500 ($SPX)


11:00-12:00 is a typical time of the day for a morning trend move to begin a larger correction. Given the momentum on the selloff, it would be difficult for the market to recover as quickly as it had fallen. The result was another test lower into about 11:30 ET whereby the Dow hit a slightly lower low into Monday's opening price zone. The S&Ps and Nasdaq held the 11:00 price support, but also pulled back, allowing for a shift in the downside momentum to support a larger correction off lows into the afternoon.

The market crept higher into the early afternoon, breaking the 5 minute 20 sma relatively easily and pushing to highs at 12:30 ET. There was a lot of overlap in price on the move higher and this allowed the indices to fall once again out of the 12:30 correction period, but the momentum shift continued and a second wave of buying on the 5 minute time frame kicked off around 13:15 ET.

The second move higher into the afternoon was very similar to the first. The pace or momentum of the move was comparable and hence the price advance and length of the rally was also similar, exhausting itself into the 14:00 ET correction period. This time the correction off the highs was more sloppy. Instead of a decent price pullback, the indices fell into a range with the 5 minute 20 sma as support. This range broke higher for a third wave of buying into 15:00 ET which took the Nasdaq's EMini contract (the NQ) to new highs on the week and even pushed it slightly through the highs of the month as well.

As I mentioned in yesterday's column, this was not as significant of a feat in the Nasdaq as it will be in the S&Ps and Dow since the Nasdaq has shown the greatest relative strength in recent months and had less ground to cover to break though highs. The Nasdaq Composite itself (the $COMPX), however, did not quite push through the 2499.14 level from May 2, hitting highs of 2498.07, just shy of the high.

Nasdaq Composite ($COMPX)


The indices pulled back off afternoon highs in the final hour of trading, leaving the Dow in negative territory with a 44.13 point, or 0.3%, loss at 12,832.18. 14 of the Dow's 30 components landed in the red. The most notable of these was Hewlett-Packard (HPQ), down 5.5% after announcing its plans to acquire Electronic Data Sys (EDS). Wal-Mart Stores Inc. (WMT) led the retailers lower with a loss of 2.4% on the day. The final selloff intraday took the S&Ps into negative territory once again by a hair, down 0.54 point to close at 1,403.04. The Nasdaq Composite, on the other hand, still managed to hold onto a gain with a 6.63 point higher close at 2,495.12. Yahoo (YHOO) made headlines intraday after announcing that Icahn purchased a large position in the company, which recently resisted a takeover by Microsoft Corp. (MSFT).

The slower upside on Tuesday afternoon as compared to Monday leaves the market still open for some upside into Wednesday morning, but the rally has been hugging the zone of the 30 minutes 20 sma, especially in the S&Ps. Moves such as this can break lower very easily, particularly given the lighter volume of this upside, so I am more bearish into Wednesday afternoon with room for another attempt to press higher on Thursday.

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.