Good day! On Tuesday market is struggled with the decision on whether or not to attempt to continue to hold last week's support at the 20-day moving averages in the major indices or continue to congest and break lower to larger support levels at 100 and 200 day moving averages. The initial daily support hit last Thursday and prices stabilized into the weekend as the volatile commodities also dealt with daily support levels.
Dow Jones Industrial Average (Figure 1)
The action immediately following Monday's close lent favor to the bears as the market continued to congest along the daily support, but the momentum shifted into the early-morning hours the following day. After striking support at the lower end of the 60-minute channel around 21:45 ET, the index futures bounced slightly to 15 minute 20 period moving averages. Instead of falling into a trading range, which would have maintained a bearish bias for the larger 60-minute congestion, the futures slid lower along the moving average, hugging it as it went for a retest of the afterhours lows. This is a distinctly bullish characteristic.
The smaller channel along the 15 minute 20 sma resistance had broken to the upside by 2:30 a.m. ET on Tuesday morning, triggering a buy which quickly erased Monday's afterhours losses. By 8:30 a.m. ET the index futures were testing the upper levels of the larger 60-minute channel that had been in place since last week's lows. The rally on the 5 minute time frame had slowed as this level of resistance neared, but positive earnings, the latest acquisition news, and decent economic data kept the bulls at the helm.