A look at the Nasdaq below highlights the breakdown, followed by the bounce, then the resistance.. and now the retest of support and possibly previous lows. I've included where the long term trend runs through (which the Nasdaq has been testing). This is an absolutely critical level of support for longs. If the market can't hold here, we're most likely headed for "bear market" terrority.
There really isn't much room to run from here. The bounce off support today was important, but the lack of conviction behind the move is a concern. It didn't have the same oomph (hope I spelled that right) behind it, that the reversal on the 24th had. For one, the volume was above average (barely) and higher than the day before, but you want to see that volume way above average on reversal moves. Additionally, we didn't get a close at the highs of the day (it didn't even clear the opening price). At this point we need more clues as to direction. Some kind of confirmation move (meaning a 2% gain with very heavy volume) in the next week or so would be the signal for bulls to begin putting money to work on the long side. Of course, a high volume move below key support levels (where we're at or close to now) would give bears the signal to go ahead and pursue more short positions.
I'm throwing in a chart of the Dow to give a look at the longer term picture. You see the violation of the trend line off the October lows, followed by a fairly weak bounce to resistance and a retest of support. There me be some psychological support around Dow 11,000, but more important will be that 200 day moving average around 10875. In all likelihood it will test that support line in the coming days:
I'm currently dabbling on both sides just a bit, but with a bearish bias. It will be interesting to see if the market can follow through on today's reversal and hold the gains for the day. It will provide another clue to just where in the heck this market will be in the next couple months. Stay tuned!