Good day! Energy, materials, and health care stocks led the market higher in Tuesday's session, while telecom shares dragged after Verizon confirmed that it will begin carrying the iphone next month. Despite the positive close in all three of the major indices, however, most of the gains took place in premarket trade. The index futures were trading in a range heading into the early-morning hours before breaking higher on news that Japan plans on stepping in to buy Eurozone bonds in a move that many hope will help curtail the spread of the region's debt crisis.
Dow Jones Industrial Average
The largest chunk of buying took place between 5:00 a.m. to 7:15 a.m. ET. The tech-heavy Nasdaq continued to lead, but the S&P 500 help strong. It pushed higher at 11:00 a.m. to retest last week's highs. This was a strong resistance level for the index, which had been in a steady uptrend on the intraday charts since hitting Tuesday morning lows. Throughout the 1 1/2 day run the index had not substantially broken its 5 minute 20 period moving average, which left the trend quite extended by mid-day on Tuesday. From 11:30 to 13:00 ET the index hugged that moving average as volume sharply declined. This created a strong bearish bias for the early afternoon and selling hit hard once the moving average support gave way.
A continuation of the afternoon breakdown took place between 13:30-14:00 ET, although the pace was slower than the initial drop. This second move took all three of the major indices into strong intraday support levels at 5 and 15 minute 200 period moving averages, along with gap closures. The slower momentum on the second selloff on the 5 minute time frame helped the indices hold the support and a reverse head and shoulders pattern continued the reversal off lows.