The Pattern Continues…
Well, it’s about time. Yesterday’s bounce was the most overdue bounce I have
seen in a very long time. The first thing I wanted to say was that volume
yesterday tailed off on the move. Now, I don’t want to throw cold water on the
biggest one-day gain this year…but the pattern of low volume bounces and
high volume drops continues. It is imperative that the market shows conviction
measured by volume. Before I get more in-depth, I will first let you know that
no matter what, I am now going to look for a follow-through day some time next
week to confirm this low. Even if one occurs, fewer and fewer stocks are
participating.
Time to look at the charts to see why the market bounced today.
The S&P 500 touched support to the penny. Draw a
line under yesterday’s low back to November and you will see what IÂ mean. 1163
is now vital support on the S&P 500.
Draw the same line at approximately 10,400 on the DOW. Definitive support sits
right at that level.
The NASDAQ and NDX are now a shade above their longer-term 200 day averages.
They best hold those levels.
Lastly, the SOX held 410, its recent breakout from
February.
Use all these levels as vital support. the market is bouncing because it found
a strong support level…finally! Let me be clear…a break below those levels
and what has been a tough environment will get tougher.
I do believe there can be upside testing here but volume must kick in and more
stocks must participate or the market will not have a chance.Â
Gary Kaltbaum