Now that I have that out of the way, let's take a quick look at the major US equity indices. The graph above is of the S&P 500. I just want to lay out my individual observations and then step back to see what they mean when taken together.
Observation 1: The S&P has put in a strong double bottom as evidenced by the bullish hammers you see around Jan 20 and Feb 11. The February low did not violate the lows from January which, technically speaking, is a bullish indicator.
Observation 2: The current double bottom sure looks a lot like the double bottom from last August/September. We should respect the similarities and be prepared for a similar outcome (ie. a 10-15% rally off the double bottom lows).
Observation 3: Momentum indicators have diverged bullishly throughout the most recent double bottom pattern. See how the MACD (lower panel) held its uptrend while the S&P fell all the way back to its January lows? Same for RSI, although in a less dramatic fashion.
Ok, while the previous observations were bullish, the following are bearish.
Observation 4: The S&P remains in a strong downtrend. The market as a whole topped 9 months ago. If the bull market is still in tact, that's an awfully long stretch for the index not to make new highs.
Observation 5: Volume has been WEAK during the recent rally. This suggests short covering and lack of long-term buying.
Observation 6: The S&P is nearing two points of resistance. First, it's approaching the late January high of 1,947. And second, it's getting close to it's rapidly declining 50 dma. Taken together, these are going to offer fairly significant resistance.
So now you can see why I think the S&P 500 is at a crossroads of sorts. I see both bullish and bearish indicators on the charts, neither of which appears stronger than the other. For what it's worth, I'm seeing the exact same things on the NASDAQ and Russell 2000 - both shown below.
Good luck and thanks for reading.