After a two week drop, capped off by a drastic two day plunge to the 200 day SMA, the S&P 500 had a strong recovery Monday. The bounce still leaves the S&P 500 below its 100 day SMA and needing to climb a wall of worry to regain its footing. This second drop to the 200 day SMA gives the bear contingent even more enthusiasm and, if possible, a louder voice. So what will it take to put the bears back into hibernation?
Monday’s bounce was a good start. And holding over the 200 day SMA is the definition of a bullish market. stopping at a higher low is another good data point. But the S&P 500 still needs to walk further up that wall. Pre-market trading Tuesday shows continuation. That is a good thing. The next milestone to achieve would be a move over the 100 day SMA and to fill the gap that opened last Thursday.
What is more important to the S&P 500 though is the second gap. The one above the March 13 high that started the last leg down. Filling that gap created February 2nd would confirm a double bottom in the latest two month correction. That would take a move over 280.41 in the S&P 500 ETF, $SPY. Momentum has turned back to supportive. That helps, but there is still a big wall to climb.
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