The market has put together a string of up days, with yesterday’s being the most vigorous. It might help to examine the bigger picture graphically of the S&P 500 and the NASDAQ to see what the next move might be. Let’s start with the S&P 500.
S&P 500 Chart
As one can see, there was significant technical damage done since the calendar turned to June. The 50-day moving average was sliced through on strong volume and it was another 60 points in a row to the downside after that. A few things strike me about this chart at the current time.
First of all, notice how the 200-day moving average was touched on intra-day basis, which started the bounce. I am guessing there were a lot of buy orders at that level ready to snap up some bargains. Secondly, it was close to the March lows, which also acted as support. These two factors served as logical points to bounce.
Technically, this index is not out of the woods by any stretch of the imagination as there is ample overhead resistance remaining. There is plenty of resistance all the up to the point where this correction started. However, keep in mind that this market over the past few years has had an uncanny ability to stage V-shaped recoveries, which flew in the face of what technical analysis suggested would happen.
NASDAQ Chart
Obviously the NASDAQ’s chart will look similar to that of the S&P 500, but there are a few differences. This correction has actually undercut both the 200-day moving average and the March lows before bouncing. This paved the way for a bigger reflex bounce, but the technical damage was worse.
As with the S&P 500, there is still a lot of overhead resistance to clear, so I believe the advantage is still with the bears for now. This index has a higher beta than the S&P, so the moves will be more pronounced in both directions. Look for the bears to start mounting a challenge in the near future to the bulls’ spirited attempts to take the market higher.
Getting Technical: Where Do We Stand After The Bounce? is an article from: 
