8:50am (EST)

The bulls were trying hard to stop the bears recent momentum and they appeared ready to end their losing streak after holding camp for much of the day.  However, the bears made it 3-in-a-row by winning Tuesday’s session after a late round of afternoon selling pressure pushed the market lower and into the red.

The major indexes were choppy for most of the session as both sides tried to advance the flag ahead of the FOMC minutes.  The news favored the bulls as the Fed indicated that some of its boys are ready to provide additional monetary policy stimulus (code name, QE 2.5 or 3.0) which fueld the market to new highs (for the session).

Leave it to Moody’s (MCO, $36.29, down $1.31) to ruin, yet, another bull party by playing credit cop again.  This is the same “ratings agency” that was nowhere to be found during the financial meltdown but has seen its share price double from a 52-week low of $20-and change.

Moody’s came out just before the closing bell and announced they were downgrading Ireland’s government bonds to “junk status”.  In case you didn’t know, Ireland now joins fellow partners, Greece and Portugal, whose debt is regarded as “junk”.   

The Dow fell 58 points, or 0.5%, to settle at 12,446.  The index traded to a high of 12,570 which was just under prior resistance at 12,600.  Although the blue-chips settled at their lows for the day, and there is still pressure down to 12,350, it tells us the bulls are still fighting.

The S&P 500 slipped a 6-pack, or 0.4%, to finish at 1,313.  The index reached a high of 1,327 – and we were looking for a close above 1,325 – but still faces pressure down to 1,300.

The Nasdaq was off 21 points, or 0.7%, and closed at 2,781.  Tech lagged for much of the day and took the worst of the beatings after dropping below the 2,800 level.  We liked the hold above 2,775 but there is further downside risk to 2,750.

The S&P Volatility Index (^VIX, 19.80, up 1.41) gained 8% yesterday and traded to a high of 20.13.  This is a key area for the VIX and one we have been mentioning over-and-over.  Although the index isn’t the most reliable indicator, this battle ground has been an early indication of short-term direction so watch it closely.

If the VIX starts climbing into the mid-20’s, the market will break major support levels and the index could run past 30 which indicates fear and panic.  However, if the bulls can hold things under 20, the market still has a chance to hit new highs in July.

Futures are pointing towards a higher open.  Dow futures are up 37 points to 12,450; S&P futures are up 5 points to 1,316; Nasdaq futures are higher by 13 points to 2,357.