So far, the move today was nothing more than a short-term oversold bounce back to the bottom of the former support zone, which is now resistance. I favor an immediate resumption of the downtrend tomorrow although a push to the top of the resistance zones on these two key indices is certainly a likely possibility as well. Beyond that, we could see a backtest of the recently broken ascending channel in the SPY/SPX although I’d put the probability well below 50% at this time. Also note how the MACD on both index tracking etf’s is beginning to cross below the zero line, a event which has historically come early in previous corrections.
Along with the backtest of the former support zone today, we had several individual active short trades make similar backtests of recently broken support, now resistance levels, thereby offering objective add-ons or new short entries. Updated SPY & QQQ daily charts:
