Although I would be surprised if we don't have more downside over the next month, it looks like we might have put in a short term bottom.
Yesterday, the nasdaq putting in a new low intraday, just barely undercutting the previous low from early March (noted by the red horizontal line above), but closing near the high of the day on strong volume. This is a bullish reversal. we tested the low and rejected it ... buyers came back in strongly at that level.
We also 'closed' above the previous low set in late April ... therefore (barely) keeping the trend up. Remember the definition of an uptrend is 'higher highs and higher lows' .. so although we are incredibly close to breaking the uptrend ... we (temporarily) avoided a new lower low (based on closing values).
Today's action SO FAR is very encouraging in that we again opened and dropped to test yet again the previous low, and once again the buyers stepped in. This sends a strong signal to the players out there that going up is a more likely short term scenario.
The next test will be the closing action today ... to see if strong buying comes in OR the opposite. Changes in the market behavior do not occur in one day, but rather over a series of events that slowly convince the trading public which way the market wants to go. With each passing positive event, the public will become more bullish and start putting money to work again ... and of course ... the opposite is true as well.
Although the market looks poised for a rise over the next few days, I am still largely bearish (in the short term) and until we see some extremely positive action, will continue to sit on the sidelines cautiously optimistic. I expect us to be able to rise to the 50day moving average (notated with the blue line above) over the coming week, and then experience another dip from there. The outcome of this rise and retest will send a strong message to me as to which way the market wants to go. Each passing day provides more clues as to the market's movement.