Bounce Is Well Established, But Nothing More

Another day of gains has effectively confirmed the first swing low, so now we await the retest. Indices are quickly coming up against moving average resistance which is the first test of them.

The S&P is about to tag the 20-day MA on a MACD and On-Balance-Volume trigger 'buy'. While I'm looking for an eventual retest of 2,191 it doesn't mean the rally will be cut short soon. There is a sizable gap between the 20-day and 50-day MAs, which in itself is a possible trade opportunity, but it's hard to see this rally making it that far.

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The Nasdaq is likewise also up against its 20-day MA, but only on a MACD trigger 'buy'. However it's close enough to its 200-day MA to suggest it could make it on this bounce. Is there sufficient demand to get the index there?

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Small Caps have yet to make it to its 20-day MA, let alone the 50-day or 200-day MAs. There was a MACD trigger and On-Balance-Volume 'buy given the extent of the bounce, there is still a long (long) way to go.

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The Semiconductor Index enjoyed the biggest bounce as it passed through its 20-day MA and is close enough to its 200-day MA to perhaps mount a challenge next week. If Semiconductors can manage this, then the Nasdaq could be next.

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This is a bounce many will claim to be participating in, but few will actually be involved. Trading volume is lighter than normal and there is a tonne of overhead supply to chew through. It's a necessary bounce, but the low retest is more important.

Disclosure: None.

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