Another day, another good sign for the bulls. New 52-week lows on the New York Stock Exchange have dropped from 1,098 to 79 in two days, one of the signs we were looking for to suggest a possible trend change. A dramatic shift that suggests that selling momentum may be drying up, but one that needs to continue.
But the bulls are nearing what will perhaps be their biggest test: 1364-1370 on the S&P 500 (first chart below). If a pullback is going to occur, that's as good a spot as any. If the index can get through that level, the bulls could be off to the races. Support on the S&P is 1320 and 1310.
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For the Dow (second chart), 12,500 is the level to beat, while 12,092 and 12,000 are support.
The Nasdaq (third chart) needs to clear 2387-2400, and 2316-2330 is first support.
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In short, the signs are good, but there is still room for disappointment if, for example, the Fed doesn't cut interest rates by enough next week or a bailout of bond insurers fails to materialize.
Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association.
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Technical Analysis: S&P Nears a Big Test