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Was Today’s Action Beginning Of A Bounce?

The DJIA 12,479.58 trimmed its triple-digit deficit in afternoon trading, but still ended on a loss of 68.8 points, or 0.6%, to settle south of 12,500 for the first time since April 25. We have been down trending pattern since May 2nd. The SPX 1,328.98 also chipped away at its intraday deficit in late-session trading, giving up just 0.5 point, or 0.04%, by the close. Helping the broad-market barometer climb out of the doldrums was its 10-week moving average, which hasn’t been compromised on a weekly closing basis since mid-March. The SPDR S&P 500 ETF  (SPY) cut through an uptrend line and its 50-day moving average, before reversing above it. This type of bounce usually lasts a few days as we were very oversold.

With no early economic reports in sight, U.S. markets Wednesday will keep their focus on Europe and the interplay between stocks, commodities and currencies. Stocks could also continue the bounce that began Tuesday afternoon. We’re oversold and got a bounce off the 50 day moving average. Now I think we have resistance overhead in the 12,600, 12,700 area on the Dow. I don’t think this bounce is going to take us to new highs. We may have an up day. If I was going to draw anything from this, currencies are suggesting that the dollar has possibly topped and the euro may be in the process of bottoming. It looks like the Europeans are proceeding along with the “re-profiling” or a mini restructuring of Greek debt. The Fed’s 2:15 p.m. release of its last FOMC minutes will also be an important factor, as investors look to see what type of discussion the Fed had about its strategy to exit its extraordinary policies and also how it discussed the economy and inflation. Oil inventory data is scheduled for release at 10:30 a.m. ET by the U.S. Energy Information Administration.

S&P 500 Technicals

The S&P 500 are testing the 50-day moving average, and a break lower would raise the flag to a potential trend shift.  The S&P’s 50-day moving average, currently 1,323, is the level to track.All told, the S&P has dropped to a significant technical test against the backdrop of lackluster sector leadership. The bull case gets the benefit of the doubt barely but it’s ultimately the S&P’s response to the 50-day moving average that should set the intermediate-term technical tone. We just may get this bounce off the 50!

Next levels to watch are the following:

Firm Break above 1355 continues Bull Trend

50 day Moving Average  - 1323

100 day Moving Average – 1310

Level 3 danger “Trend Line” – 1260

200 Day Moving Average “Buy on the Dip Level”- 1234

Tags: resistance, S&P, S&P 500, s&p support, s&p technicals, simple moving average, spy, technicals

This entry was posted on Tuesday, May 17th, 2011 at 9:48 pm and is filed under Contributors, Facebook feed, Technical Stocks. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.