Despite the strong day of selling on Monday, the indices have stuck to the recent tradition of sharp overlap from one day to the next as daily congestion continues. Monday afternoon's 15 minute support held and the slight shift in momentum in the final 45 minutes of trade helped the market form an initial recovery afterhours. Resistance from Monday's mid-day price congestion struck around 21:00 ET, but the index futures hugged this resistance zone and were able to break through it once again with strength out of the European open. This has created a second wave of buying off Monday's lows that has returned the market to the price zone at Monday's highs. Despite the increase in momentum into this level, it will still serve as resistance heading into Tuesday's open and we can easily expect to see a choppier morning session. Maintaining a strong opening trend will be difficult.
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.