The Fed threw the market a life preserver today.  Comments alleviating concerns of a more aggressive policy whipsawed the market in the opposite direction, saving the market from drowning and undoubtedly inducing some short covering along the way.  While big reversals like this often mark the bottom of a correction, I see this as more of a knee jerk, relief rally.  It was nice to see the market looking for an excuse to rally, but It will take a couple more days to get a firm sense of the impact of today’s action.  Another day of heavy accumulation would provide the signal to pursue long opportunities with a bit more aggression.

The Nasdaq, once again dangerously close to plummeting below its last line of support, was able to claw its way back above this key level to remain "in the doghouse" that it’s been in for the last couple of weeks.  Should today’s action propel the Nasdaq higher in the coming days (and there’s a good chance it will), it still faces major resistance around the convergence of the downward trend line and the 50 day moving average.  There is much work to be done!

The thing that stands out in the chart of the Dow today is the bounce off that key support level around 10365 or so.  It could be enough to propel the Dow a few hundred points into resistance.  This area around 10365 is so crucial in my opinion.. If we drop below that level, here comes 10,000 and possibly much lower.  The the other important thing to note is the topping formation that both the Dow and S&P may complete in the next few months.  It’s probably more head and shoulders than triple top, but either way you look at it, it’s cause for concern and something to keep an eye on over the next several weeks.  The area around Dow 11,000 will be a major source of resistance should it get that far.

Here’s the longer term view of the Dow which shows the importance of holding at current levels.  The longer term, bull market uptrend is in danger.