Equities rebounded for another day on Tuesday but eager investors are warned to be cautious. The market opened with a big gain near2.0% which were also near the highs of the session. The highs were consistent with the 30-day EMA which provided resistance and capped gains for the day. At the low, the index was up only fractions of a percent and showing a dark candle confirming the downtrend that began in mid-August. If the market follows through on this signal the S&P 500 will retest the 3,500 level and possibly move even lower.

Tuesday was also marked by mixed economic data. The industrial production and capacity utilization figures came in better than expected but were offset by a new low in the home builders index. The NAHB home builders sentiment index hit 38 which is the lowest level since 2012. The gauge contracted on new traffic and the outlook for sales which hit 25 and 35 respectively. With this trend in place, the contraction in housing markets is gaining momentum and may drag the rest of the economy down with it.