Stock market taking cues from overseas strength

The market contined to push higher throughout the first 45 minutes of the session thanks in part to more reassuring data at home. The Institute for Supply Management's manufacturing survey showed an increase from 52.7 in November to 53.9 this past month. Furthermore, the Commerce Department reported a 1.2% increase in construction spending in November, which was the third increase in four months.

Although the gap on Tuesday morning was larger-than-average, the rally ran out of steam 15 minutes after the morning's domestic data came out. This is actually quite common. Except in instances when the overall market is gapping out of a dailt trading channel, larger-than-average gaps in the indices have a tendency to fill. Tuesday's gap was somewhere in between. It was a gap out of a 60 minute trading range, but held the daily uptrend channel of the past several weeks. This left it having a difficult time going anywhere once the regular session was under way and the day's range was narrow compared to most over the past year.

S&P 500 (Figure 2)

The day's action intraday was still decent for daytraders, although the narrower range meant greater risk compared to reward on individual setups intraday. The best moves came from catching the 15 minute reversals. These fell at 10:45 a.m. ET with one of the morning's major correction periods, 13:00 ET at another major correction period, and 15:00 ET, which was yet another major correction period. Strong support and resistance levels, as well as trend placement on the 5 minute time frames, helped these moves follow through. The 13:00 move also found help from the Fed, which announced that it would be providing quarterly updates on its interest rate position regarding how long it intended to keep rates low.

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