Today was a very strong day in terms of the tone it set. Yesterday we had the makings of a potentially very bearish situation, but today the market spoke loudly that we want to go higher. we closed on the SPY and IWM above yesterday's high which means that all people that shorted yesterday are going home negative tonight. The longer we can stay above this level, the more of these bears will close their positions and provide fuel to the upside move.
Yesterday's price formed what is called an 'inverted hammer' candlestick, which is an bullish indicator if the next day confirms an upward movement and sure enough we got that confirmation.
With that said, today's volume was pretty light which is cause for caution. We need people participating in the upward movement and sitting on the side during downward moves, but today implied many people sat on the side lines. Also, the Nasdaq only closed up half of yesterday's candle ... leaving a bit of uncertainty in that index.
I think we are at an important junction here, if we can close up again tomorrow, it sets the stage for a bullish move over the next few days; if it is flat or down, it could cause the bears to get more bold in their selling.