Flat Trading and Volatility

As I expected and as I mentioned in my "S&P 500 Chart" post on February 7, 2010 the indexes and the market are moving up from their February 5, 2010 low. Still it's difficult to call this up-move as a strong recovery. 3% on the S&P 500, 2% on the Dow Jones Industrials and 4% on the Nasdaq 100 does not looks like the market is in a mood to show strong reaction on highly oversold indications noted in period from January 29 until February 5, 2010.

Taking look at technical analysis of volume, advance/decline and price based indicators I may say if at the beginning of the week majority of the indicators signaled bullish trend, right now, after one week of almost flat market, we still may see bullish indications yet, these indications are not as strong as they were a week ago. Still, I would say the odds would favor the recovery towards at least January 26, 2010 highs. However, we may see change in the sentiment any trading session.

We should not forget that the stock market has been in the strong up-rally for six months (since the middle of July 2009 until the middle of January 2010). It would be natural and healthy for the stock market to have a strong correction down (as we have now). It is difficult to state how strong the current correction should be in order for the market to resume its up-move. It could be that on January 5, 2010 we saw the bottom of this correction, still there is a possibility that we may see some further recovery and attempt of the market (indexes) to revisit the most recent lows.

The biggest concern that I have at the current moment is that within the last week of almost flat trading we have not seen decrease in volatility. Yes, the indexes (S&P 500, DJI and Nasdaq 100) have moved up couple of the percents, however, this up-move has been volatile.