The Nasdaq Composite ($COMPX) ended the session higher with a gain of 57.60 points, or 2.19%, on Tuesday and it closed at 2,687.26. Research In Motion (RIMM) trimmed its losses with a gain of 10.27% to lead the Nasdaq-100 after sharp losses the previous week. Other top performers were Baidu (BIDU) (+7.97%), Priceline.com (PCLN) (+6.28%), and Whole Foods (WFM) (+6.17%). Only five of the 100 index components posted a loss. Only Sears Holdings Corp. (SHLD) (-2.16%) posted a loss over 0.5%.
As we head into Wednesday we don't have the clearer price action to help guide the day's events. Two-wave rallies off lows into daily resistance will often end right there and be followed by a larger correction. This is not always the case, however, and at other times you'll get a third push to the upside. This seems unlikely to happen on a strong scale on Wednesday, but a false attempt is still possible. This is the price level I theorized about yesterday as being a point where the market can once again turn lower to lead the indices into a stronger test of the 200-day moving average support and while it doesn't look like such a test will happen quickly, it still remains a risk.
With the FOMC announcement looming on the horizon this afternoon, expect the morning price action to favor the day traders and scalpers and for things to quiet down mid-day until following the news. No change is anticipated out of the Fed, and while the reactions to the announcements are substantially less pronounced than in past years, you'll still want to be extra cautious positioning yourself immediately following the Fed's release of its current interest rate policy.
Unless otherwise stated, the index action described in this article relates to the E-mini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.
Toni Hansen is president and co-founder of the Bastiat Group Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.