The S&P 500 turned down just below the 200 day moving average, the Dow broke above its SMA 200, turned down but is now testing it as support, and NDX found resistance at its SMA 200 after hitting and failing to clear it.
The reason I did not prefer a ‘V’ type bounce in order to be an intermediate-term bull is pretty obvious. There was no bottom making or testing of the lows. There was a spike upward off of over bearish sentiment and downside momentum. It feels like bear market action (some of the most dynamic rallies come during bear markets as the shorts get cleaned out) or at least action needing a breather.
So we see the Dow nesting above the SMA 200, SPX stopping short of its SMA 200 and NDX finding resistance at its SMA 200. Just as these were important markers on the way down, so too are they on the way up. Notice the gaps on all three headline indexes. Unless those fill I would have a level of moderation about additional short-term upside from here even if the market puts on a rally to end the day. And if they do fill, it means the gaps are gone but is not necessarily bullish. But all things being equal, bulls would rather not have them there.
If SPX and NDX take out the 200 day averages to join the Dow then we can talk about the upper resistance targets. But for now it looks like the market has found a handy rest stop and it could have some unfinished business with those gaps. We’ll see how it shakes out and update on Sunday.
