U.S. stocks made an aggressive charge at breaking below the 150-day moving average on Wednesday morning. But this ambush was quickly turned back the moment stocks arrived at this support level and the bears find themselves in retreat heading into the afternoon trade. Stocks received an added lift to the upside once the clock struck half past ten in the morning with the liquidity from $3-4 billion in Fed Treasury and TIPS purchases finding its way into the market.
In addition to the 150-day moving average, stocks as measured by the S&P 500 Index have additional support at an upward sloping trend line that has provided support on five previous occasions over the past year.
Whether stocks are able to bounce sustainably higher from these levels remains to be seen in the coming days. But the further that stocks fall, the greater the technical damage and the more previous support levels suddenly become resistance. And in a market that remains woefully short of fundamental support, investors should remain cautious and avoid becoming too comfortable on any bounce higher from here, as such rallies in the coming days, weeks and months are likely to be accompanied by increased volatility and may represent the market entering the final stages of completing a bull market top.
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