Editor's Note:

Today's session was very bullish although technicians will argue that the lack of volume behind today's move throws doubt on the rally's sustainability. The S&P 500 did power through several key moving averages and levels of resistance. Yet you can see from the chart below it stalled right at another level of downtrend resistance and looks very short-term overbought. In the last three days the S&P 500 has rallied +7.6%, the NASDAQ composite +7.3%, and the small cap Russell 2000 index +10.6%.

We do not want to chase a move like that. Yet the rally could keep going. At the same time it feels like a bear-market bounce. I'm not saying we're in a bear market but the characteristics of today's move (really violent, low volume) are typical in a bear-market atmosphere. If you're bias is bullish then I would look for a dip back toward the 1220 level as the first spot to consider new positions. The next level would be 1200. As you can see the 1265 level and the simple 200-dma is the next hurdle for the bulls.

Chart of the S&P 500 index: