Equity rally continues to struggle

Good day! As we headed into the new week we were faced with a bearish bias in the indices after Friday's moderate correction off lows. The momentum continued to shift in favor of this bias on Sunday evening when the futures began trading. Slower upside than seen on Friday was followed by the start of a larger pullback into the early-morning hours on Monday. This weakness reflected losses in the Asian and European markets. By the time the opening bell rang, however, most of the bearish bias I noted over the weekend on the 15-60 minute time frames had already played out and the index futures were once again testing Friday's lows.

Dow Jones Industrial Average

Since the premarket drop in the indices was on par with a typical 15 minute trend move in the indices, the previous lows served as strong support. The Dow Jones Ind. Ave., which had hit support earlier in the morning and formed a base along premarket lows, was the only one of the three major indices to push through that support. The longer period of congestion allowed the Dow to catch its breath and breakdown once again shortly after the opening bell. The move did not last long, however, and by 10:00 am ET the lows of the day were in.

The strength of the selling once again made recovery action more difficult. A solid uptrend took hold as the Dow and S&P 500 bounce off their 20 day moving averages, but the pace of the trend was more gradual than the earlier weakness. The tech-heavy Nasdaq had the easiest time punching through prior highs, while the Dow lagged and was not able to even close the morning gap.

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