After two bounces, we have now established a major support line in the major indexes. For the Dow, it’s around 11,900. For the S&P 500 it’s around 1,270.

Today is a major sign of strength as prices took a major tumble and then closed near the highs on very high volume. The increase in volume corresponds with the wide range of prices so we know it is a healthy move.

Here’s a chart of the S&P 500:

I've got the established trading channel marked and as expected, we could see some sideways before moving up or down.

So what I am taking from the recent activity is that there is definitely strength in the market and this looks like professionals have pushed prices down and are now buying again.

I wouldn’t be surprised if the indexes jumped up tomorrow to confirm the buying. This doesn’t look like a bottom yet but if we get further advances on high volume, it could definitely be the start of another rally.

Ideally, we want a gain of 2% or more on above average volume to officially establish a new up-trend. Keep it here for more updates.