The Markets Big Test At The 50 Day MA (SPY, IWM, QQQQ, DIA)

Mar. 22, 2011 2:37 AM ETQQQ, SPY, DIA, IWM
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Market Confirmation: Market Uptrend Broken

Short Term Action: Old support levels being tested in attempt to re-establish uptrend
 

We are in day 3 of a bounce after surviving one of the ugliest weeks in the last year. Just like markets can’t go straight up without pulling back and refreshing itself, a market can’t go straight down without bouncing. It’s where we bounce and what the volume looks like that tells us what will most likely happen next.

The market bounced last week at an obvious support level, the 100 day moving average, after slicing through a key support level earlier in the week. The volume was heavy on the downside and we are still seeing very anemic volume on the up days. This pattern almost always is very negative but if we can retake the 50 day moving average and hold it for a couple days then the bulls have the chance to regain the uptrend. What is important to us isn’t whether the bulls win or the bears win but that a tradable, predictable trend is established.

Despite the fact we had 3 up days each day gapped higher and either sold off or traded sideways into the close.  The small and midcaps are showing the most strength which is good.

Here is where the big test is for Tuesday right at the 50 day moving average. Breaking support levels is one thing but when old support levels as important as these turn into new resistance levels, this is where things can get ugly to the downside.

S&P 500

 

Dow 30

 

NYSE

 

NASDAQ

 

Russell

 


 

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