Today’s (Tuesday, July 29) resurgence was more than just the Bulls retaking control, it was domination of the Bulls over the Bears. Though the volume was lower than average, this counter move came with much greater volume than yesterday’s move down. And not only did the Bulls retake the momentum, but they engulfed yesterday’s red candle with a strong white candle today. Another encouraging stat is that the market internals were much stronger, with advancers overtaking decliners by more than a 2 to 1 margin on the Nasdaq, and by more than 3 to 1 on the NYSE.

I was preparing for the worst today. In my last post I painted the scenario of losing 1200 on the S&P 500 ($SPX), and how the 60 minute charts showed near term Bear domination. I really didn’t expect the markets to recover in this fashion and I thought my declaration from last week that 1200 was a bottom was in dire straits. And as it turns out, the last few days where a correction from our recent rally off the bottom. It can be very difficult on one’s constitution to be thrashed back and forth like this. But this is what one has to expect when the market tries to put in a bottom after such a nasty Bear market over the past two months.

For now the outlook has changed. We can refocus our attention once again on the next wave up, the next level of resistance, and that’s the high put in last week of 1291.17 and the 1300 level, which represents both price resistance and the 50-day exponential moving average. If we over take these targets we are in good shape to put in a 3 wave up (that’s Elliot Wave lingo for kick ass)! But let’s not get too excited, treat this move with guarded optimism. If this move is just a reaction to being very oversold, and we don’t clear 1300 with strength, then we could come down hard. We need to clear this level with conviction to confirm this is in fact a 3 wave up.

As an Apple investor, we’ll take any day in the green, but AAPL did not necessarily share in the extent of the broader market’s advance. While the S&P was up 2.34% and the Naz was up 2.45%, AAPL managed only 1.74%. And AAPL didn’t plot a bullish engulfing candle, instead it sported an indecisive spinning top. And today’s volume with this advance was lower than yesterdays volume with the decline. So, maybe Apple investors are not quite as confident as the rest of the market?

So what have we learned from the recent action? Well, we’ve learned that Bear markets are brutal hellish rides. One day they rip you apart, the next day you feel there’s hope and optimism. We’ve also learned that taking strong positions in such a market can be fraught with peril. This is why I have been preaching to go light, or simply stand on the sidelines. If you’re a long at heart, the best place is definitely on the sidelines. If your a short term trader, it’s best to put less at risk, hedge your bets, and develop a hair pin trigger. 

The next few days our focus is on overtaking the 1300 level on the S&P, and hopefully AAPL will join in that quest. But I have a sneaking suspicion that AAPL investors are guarded for good reason. Perhaps we should take heed and approach the next fews days very carefully. Take the advances you can get, as AAPL approaches 162 consider selling into that strength, 162.50 represents strong resistance. Cash is king in a down market.

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