Wild trading leads to possible bottom on the SPY

Wednesday's trading was all over the map. The market opened flat and inched up before flushing dramtically lower, going from nearly 126 to 123.50. From there, the SPY staged an incredible rally pushing up to close near new highs on the day. This is an impressive move for a market that has seen seven powerful down days in a row.

A big flush followed by a huge rally on SPY 10 Min

The market was and is long overdue for a bounce. Financial turmoil in the EU and the US has created an enormous amount of fear and that tells me a short term bottom may be in place.

Technically, the daily SPX chart has a bottoming tail indicating the potential for higher prices in the days ahead. Until we close below this tail, I'll keep an upside bias on the markets. If I'm correct, expect a move back to a 50% or 61.8% fib level before ultimately trading back down.

A bottoming tail signals the potential for higher prices on the SPX

Because this is the first up day after several down, I'm keeping my analysis simple until a bottom is confirmed with a followthrough move higher. When and if that happens, I'll have more concrete support and resistance levels.

Going into the rest of the week I will be trading very carefully until I have a better handle on the direction of the market. Tomorrow's close will be telling.