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This stock market bounce hasn’t shown incredible follow through

And the fact everyone is expecting a bounce in the stock market just after a two-day sell-off in the S&P 500 (SPY) goes to show just how ridiculous the expectations have become for this stock market. Sure, it was a huge sell-off on Friday, and the largest since April, but the this market has been primed for a pullback for weeks now, but the endless bid in Nvidia (NVDA), Broadcom (AVGO) and Advanced Micro Devices (AMD) have refused to let that happen.

The bounce today is certainly impressive, and and time you are looking at 100 point rally in SPX, you assume there is some big news to support the rally, but there is old trend-line resistance, on SPY, as well as the 20-day moving average that seems to be hampering this move today.

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What is unknown is how strong that trend-line is, that until Friday had consistently bounced off of since May, will be as resistance. So far today, it is pushing back, but this is only the first attempt. And right on it you have the 20-day moving average as well, and aiding it with additional resistance is also the 5-day and 10-day moving averages.

As support, you have the 50d-ay moving average holding strong with Friday’s test, but what I am watching for here is a potential failed bounce that ultimately sees price dip back below Friday’s lows and the 50-day moving average and ultimately test support at the 624 area.

The T2108 (percentage of stocks trading above their 40-day moving average. is still trading at 30%, which is one of the biggest of divergences and last time we saw it like that we got a the late February through early April Liberation Day sell-off. It was signaling a massive sell-off weeks in advance and we have the same conditions for that here once again.

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For now, I haven’t added anything new to my portfolio today, instead I am waiting, in 100% cash for a clearer signal of what this market really wants to do going forward, because right now there seems to be a lot of signs still that we may still be looking at a dead cat bounce here.

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