We are back below the key levels of 1,000 on the S&P 500 (SPX) and 2,000 on the Nadaq Composite (COMP) -- basically we have somewhat waffled around these key technical areas recently. There was a big move in the CBOE Volatility Index (VIX) yesterday, as it reached above 28 intra-day. We mentioned last week that 28 looked like the short-term upside cap on the VIX, and that seems to the case, as we are moving lower today (see the following chart).
VIX Daily Chart
Looking at the Nasdaq 100 (NDX) Daily Chart below, you can see that we basically had a classic Percent R bullish re-test on Monday, which seems to be confirmed today. This is also similar on the other major index charts. If you are using Daily Charts as your primary guideline, then today's snapback rally would seem to bode well for further upside.
NDX Daily Chart
Looking back at a multi-yeat Dow Jones Industrial Average (INDU) (NYSEARCA:DIA) chart below, you can see that the recovery still has some potential upside ... but we haven't really made much headway in the Monthly view. Percent R is still below the 50 mid-level, and the INDU faces overhead resistance in the 10,000 to 11,000 area. We could certainly rally to that area, which would bring Percent R closer to 50. You can also see the relative volatility we have experienced, as the Bollinger Band Width Indicator at the bottom had reached very high levels.
DJIA Monthly Chart
Bottom Line: The market bouncing back from Monday's selloff appears to provide some short-term impetus for further upside. Keep in mind that this in an Expiration Week, however ... which may bring with it increased volatility and the potential for stocks and indices to be drawn towards certain strikes with heavy open interest.
Disclosure: None currently.