The long awaited bounce for the market has finally arrived and with vigor. I don’t think it was a coincidence that the 200-day moving average held perfectly twice and provided sound footing for stock prices. Obviously the big question is what happens now? Is a trading range between the 50-day and 200-day moving averages in the cards?
Still Work To Do
The bulls will start to face tough sledding as the S&P 500 is starting to bump up against resistance at its 50-day moving average of about 1317. That is also the approximate level of the neckline of a possible “head and shoulders” formation, which also acts to keep a lid on prices.
In addition to technical factors, optimism on the Greek debt crisis acted as a catalyst for a strong counter-trend rally. However, I think the market rallied more on the anticipation of the Greek austerity plan, and now that it is announced, a “sell the news” reaction is certainly possible.
The “V” Strikes Again
The past few sessions have resulted in powerful rallies that have produced yet another “V” shaped bounce. Of course, market watchers should recognize this familiar pattern and not be surprised that this has happened one more time. The feeling that people will miss further upside seems to have returned at least for right now.
Investors will likely focus on economic data and other factors such as QE2 ending as well as the impending debt ceiling issue. I think that the bounce has been spent as a result of Greece and bulls will have to look elsewhere in order prolong the rally. That could come in the form of second-quarter earnings season which will start in earnest in a few weeks. If you are bullish, look for a decisive break above the 50-day moving average at 1317 on strong volume.
Getting Technical: Oversold No More, But Now What? is an article from: 
