Good day! The indexes continued to push higher on Tuesday despite correcting off premarket highs when the S&P 500 and Dow Jones futures created a double top at approximately 5:30 a.m. ET. This reversal pattern off highs actually followed through quite well with three waves of downside lasting into the 9:45 a.m. ET correction period. This pullback took the two indices back into Monday afternoon's lows where they struck support.
The selloff itself experienced a slowdown as is continued, thereby shifting momentum into opening trade. This momentum shift created a buy strategy that triggered once the channel from the move into the third low broke to the upside. This pattern development can be viewed on the 15 minute, all-sessions chart of the ES shown below.
Dow Jones Industrial Average
As I mentioned in Monday's column, the indices still maintained the upper hand heading into Tuesday. The pace of that upside was not as strong as the intraday rally on Monday morning, but the overall daily momentum has increased over the course of the past five trading days. This is typically an encouraging sign, but the breakout over the past several trading days was slower than the rally at the end of last month into the 1st of February and the volume has been lighter than most of the year to date. It's not enough to confirm the end of a move though and most of the swing trade strategies I come across in my scanning are still buys with very few strong candidates for the short side just yet.
The Dow Jones Industrial Average ($DJI) had a gain of 71.52 points, or 0.59%, and closed at 12,233.15 on Tuesday. The top performers in the Dow were McDonalds (MCD) (+2.60%), American Express (AXP) (+2.37%), General Electric (GE) (+1.96%), and Home Depot (HD) (+1.53%). McDonalds led the index thanks to stronger-than-expected same-store sales in January. Only five posted a loss. The weakest were Exxon Mobil (XOM) (-0.61%), Bank of America (BAC) (-0.41%), and Intel (INTC) (-0.28%).
Disney (DIS) reported earnings after the closing bell that topped analysts' estimates on both earnings per share and revenue. Shares were up nearly $1.50 afterhours to continue the strong daily breakout that triggered early last week. This could easily leave it exhausted heading into Wednesday and put pressure on those hoping for the move to continue.