Correction Periods Play Pivot Roles in Intraday Price Action
The selling pressure in the market resumed had resumed on Monday at the 15:00 ET correction period after the market paused at 5 minute, 200 period moving average support 30 minutes after the initial wave of selling kicked off. The market remained under pressure afterhours, but the pace of the selling slowed and by the time the European markets opened we were already seeing some recovery action in the form of a 15 minute Phoenix as the index futures hugged 15 minute 20 period moving average resistance. The buy trigger came at 3:00 a.m. ET and the recovery continued into mid-morning when the Dow Jones Ind. Average ($DJI) struck price resistance from Monday's breakdown zone. This zone hit at the same time as the 10:45 ET correction period that served to help put a halt on Monday's rally.
Nasdaq Composite (Figure 3)
Getting Technical in Tuesday's Trade
As Tuesday's session progresses, the market is going to continue to face stiff resistance from November's highs. Slightly higher highs on the 30-minute charts this month in the S&P created bull traps, while a triangle on that same time frame in the Nasdaq threatens further weakness in the short term. On the five minute time frame the indices are also facing a struggle with the onset of the 10:45 ET correction period. The market had established an initial wave of buying on the intraday charts in the final 30 minutes of trade on Monday. This was followed by a secondary move higher into the 10:45 ET zone, but the pace was more gradual, weakening the move and leading me to post a corrective bias on that time frame for those who follow me on Facebook. Getting more than the smaller, intraday scalps off the 5 minute charts will be difficult for index traders today.
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.