Overall, things are looking bearish after we failed to move above a previous level of resistance as seen in the following chart:

The resistance and support are converging, creating a turning point.

Despite the slight jump in volume today, we have seen the market drift with only one day of above average volume in the month of July. Another interesting point is that this is the first time since April that the S&P has spent more than a couple days above the 50 MA.

It’s worth noting that we could possibly be seeing an inverse head and shoulders pattern:

A possible pattern forming is the inverse head and shoulders.

If we get a boost higher off the moving averages, this could be a legit pattern and we could see the head serve as a bottom. Check back for more.

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Here’s a chart:

Here is the current trading channel the Dow is moving within.

Regardless of where I think it will go, the market can still move above resistance. If this happens, watch for a a follow through day and for the market to continue higher.

I’ll do a weekly wrap-up tomorrow. Have a great Friday!

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Also, volume was slightly higher today than the previous two sessions. Again, if your are short the market, you want decreasing volume on rising days and increasing volume on falling days.

We're seeing lower highs and lows as we move on in time. Until this changes, the market could continue to fall.

I expect the market to continue to bounce around between 10,050 and the moving averages before finally moving below the support.

The thing I would look for to see if the market could go higher is a high volume day where the market moves down sharply and then finishes near/on the highs for the day. Otherwise, expect it to continue lower.

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**I edited this post to put a better quality video up. Windows Media Player is required to play the video.

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I've circled the three times the S&P has bounced off the 50MA.

We are now up to three sessions closing right on the 50MA. While volume is still below average, we have seen an increase as of late.

To answer the question posed above, I don’t think we will see any further rally above the 50MA for the mean time. My reasoning is the decrease in volume as stocks moved higher shows a lack of buying to propel things any further and a relative increase as stocks reached the moving averages, usually signaling a reversal.

Earning season is upon us though, so some unexpected positive data could be the catalyst to bump the market higher and on top of resistance.

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