If you looked only at the closing numbers today, you would expect that it was a pretty boring day on Wall Street. On the contrary, the market had two distinct moves today and under the surface, the action once again was positive and bullish. The first hour or so of today's session saw some heavy selling, but the market never even got as low as the key support I mentioned last night around 1075 and 2205 and after chopping around a bit through most of the afternoon, a bounce took stocks well off their lows in the final hour and stocks closed basically flat. For the second consecutive day, the bears had a golden opportunity to take this overbought market lower and they couldn't do it very well, and that is very important. Volume appears to be heavier today.
Technically, things look very good overall for the bulls. We are still overbought and could afford further rest here - we'll see if we get it. A lot will still depend on earnings - as I write this, GOOG is down after-hours, so we could still see some selling come in at this point. The key thing to watch is whether the dips continue to be bought as they have been the past two days. This action represents a change in character for this market and as long as it continues, you have to start looking for longs and if nothing else, hold off on shorting anything. We are still below the 50 day moving average and the 200 day is still overhead as well on both the S&P and Nasdaq, but if these bull flags continue to form as they are, I think the market has a decent chance to bust through them.
I did not make any moves today and remain in cash, but I am looking. I would ideally prefer further rest or pullback here - actually a real test of 1075 and 2205 would be tremendous, with perhaps an intraday move below those levels to really test the bulls' strength. Who knows if we get something like that? It's possible on this options expiration week that we get a headfake tomorrow. Overall, however, my numbers are turning bullish and because of that and the intraday action of the past two days, I am strictly looking for long positions right now. I don't see a ton (again, further consolidation would go a long way to establish more patterns) but there are some I have my eye on and if they trigger, I may just jump on board. If I have time, I will try to share some of those charts. Take care and good luck Thursday.