Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The issue with yesterday’s bounce is it came not too far below some key resistance areas. Hence there was not much room to go before there might be some trouble. Of course during many of the V shaped bounces since 2009 resistance has meant nothing so it can’t be taken for granted that indexes will respect “obvious” levels but in this case they did. I will post the S&P 500 and Russell 2000 as the NASDAQ has been much weaker and did not necessarily bounce to any obvious area – also the weakness in Apple is affecting it in an outsized way. Also note the much broader weakness in the R2K vs S&P again.
The S&P 500 bounced perfectly to the 50 day moving average – almost too obvious. Keep in mind today’s reversal down did NOT puncture the April 2012 highs of 1422 which has been a line in the sand the past week+. After spending 4 sessions below, it regained it yesterday and that has held as a floor today. Back below that level would be a negative sign.
The Russell 2000 not only was rejected at its 50 day moving average but is traveling a descending channel, of which it essentially hit the top end of this morning as well. This, after bouncing off the lower end of said channel – near the 100 day moving average.
Overall, this is the type of bounce that simply relieves oversold pressure. Until a new higher high is made somewhere along the way (SP 1464) the onus is on the bulls.
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