When the S&P gets back to (converging) 50-day and 200-day MAs it will find itself up against supply generated by these key moving averages. However, there is room for upside before then.
The Nasdaq successfully defended 4,900 support on higher volume accumulation. The gains weren't enough to reverse any of the bearish technicals, but the basis for a swing low could be in place with the bullish hammer.
The Russel 2000 was the one index not to benefit from today's gain. It posted a loss which kept it close to former channel resistance turned support.
The Nasdaq 100 almost tagged the 200-day MA, and may have created a bullish piercing pattern on today's close. It's the index closest to new highs, and the index most likely to lead should bullish confidence build.
Tomorrow will test how much interest there is from bulls to continue with a 'Santa Rally'. The main concern is the lacklustre action from Small Caps. Without this index, bulls will struggle to maintain momentum. The longside play may be to go with Small Caps, but if bears take advantage of this lull then Small Caps will be on the thick edge of broader market weakness.
You've now read my opinion, next read Douglas' and Jani's.
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com, and Product Development Manager for ActivateClients.com. I do a weekly broadcast on Friday's at 13:30 GMT for Tradercast, covering indices, FX and gold, silver and oil - all are welcome! You can read what others are saying about Zignals on Investimonials.com.
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