When markets sell off roughly 10% off the top, it's extremely important to see how oscillators set up once the selling calms down. To look at how the daily charts will set up once some buying comes in. Watching the stochastics and MACD in particular to see if they can cross fast line over slow line which is bullish. Off deeply compressed levels we are seeing some nice crosses happen. This in it of itself does not guarantee that things will turn up and shoot higher from here but it does show good action and tells us the worst of this correction is likely over. There are headaches dead ahead that normally would give the market problems so there is no go out and buy 100% of your portfolio dollars signal here.

The headaches being gap resistance not far above along with 20- and 50-day exponential moving average resistance also not far above. There are no rules that say we can't just blast through these resistance levels but normal protocol would be for the market to pull back some off these levels. If the pullback isn't bad, and I don't expect it to be, then the market would be set up to move nicely higher. With so many individual stocks showing good bottoming action on their oscillators, I do believe the worst of the correction is now over and thus buying weakness and solid set ups will be the way to play.

Let's spend a moment once again looking at those resistance levels that are dead ahead and thus where we may struggle a bit before getting through. On the Nasdaq, which closed at 2177, we see gap and 20-day exponential moving average at the same 2190 level. The 50-day exponential moving average just above at 2203. There isn't a whole lot between today's closing price and these levels but the way things are setting up I don't think it'll take too long before we can get through them. Probably pull back some, like I suggested, but I really don't think it'll more than about 1%.

The S&P 500 closed at 1078. The gap is at 1090. This also happens to be the level of the 20-day exponential moving average. The 50-day exponential moving average is at 1098. Again, lots of resistance dead ahead but over time I think we'll clear. Resistance is tough when down trends are confirmed. However, quietly I believe this down trend is ending. Not easy here folks. expect more whipsaw as we approach and deal with these gap levels and with these moving average levels but in time we should be able to make the move through them.

We started lower today with the Nasdaq down double digits and the Dow getting close to triple digit losses. Just when it looked bad the bulls stepped up and took the markets back up getting close to the break even level. After hanging near the flat line a little while the bulls took over and made their statement. Up we shot and it was this up move where the oscillators started to really turn more bullish looking. This is when many of those stock and index charts on the daily's started to make some bullish crosses. It was important to see this take place and once it did, it became increasingly more difficult for the bears to find any sustainable downside. We closed just off the highs for the day. Solid action although remember, still below critical resistance. The bulls are starting to look better and better but not out of the woods quite yet. It's getting interesting after today's solid bullish reversal.

Folks, things can turn very quickly in this game. Yes, we are still in a down trend until those gaps and moving averages can be taken back but now we're starting to see a change in the oscillators on the daily charts which are more favorable. In addition, the weekly charts have dramatically unwound some very overbought conditions which was absolutely necessary for this market if it was going to try higher prices yet again. Stochastics in the 90's and RSI levels near 70 just weren't sustainable but now things are nowhere overbought any longer. Add in how sentiment has reversed and I warm you about staying too bearish here. Let me again remind you that I'm not suggesting just a straight up and out move here. There is tough resistance just above and it should pull us back some. However, I do believe this was only a correction and I now believe the worst of that correction is behind us.

Slow and easy until those 20's/50's are in the rear view mirror.

Peace

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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