Did everybody survive Tuesday's volatility? Geez. How crazy was that? Just when it looked like we were finally moving past the point of no return, the bulls came back to the table with an appetite. I can tell you what's going on that finally materialized in today's wild swing. I'm just not sure you're going to like it. Yes, stocks were more than happy to push lower right out of the gate on Tuesday morning. In the case of the S&P 500 the index fell below the key 200-day moving average line at 2055, while the NASDAQ Composite broke below its key support line at 4956. These are both levels we specifically mentioned in yesterday's newsletter. (Almost) needless to say, the bears were completely unable to hold the indices below those big lines in the sand. Had they been able to do so, I suspect that would have been the beginning of the end.... the beginning of a more dire - though not apocalyptic - pullback. The bulls aren't having it though. They saw the thrust into new-low territory as a buying opportunity into a longer-term uptrend. Or, maybe it was the Plunge Protection Team. My guess is, this intraday rebound was driven by some new/naive investors who have forgotten that stocks can and do get too overbought for their own good. Who knows? Whoever or whatever it was, they simply don't want to let the market go down. Thing is, they're fighting a losing battle. Oh, they won today's battle to be sure. I've got a feeling today's sharp intraday reversal has set up some bullishness into Wednesday's trading too. The ceilings are still there though. For the S&P 500 that ceiling's at 2097, where the 20-day moving average line and the 100-day moving average line are about to converge. For the NASDAQ Composite the ceiling is somewhere around 5060, where the 20-day and 50-day moving average lines are about to intercept. We may or may not even test these levels, but if we do get enough bullish follow-through after today's romp, I'd be shocked if either index managed to exceed those levels. There's just been too much water taken on over the course of the past two weeks. As for the bearish clincher, I'll reiterate what we told you yesterday - the S&P 500's first close below the 200-day moving average line at 2055 (especially after today's move below it) is apt to be the point where the market simply can't snap back. At that point it'll pretty much have to go through with a full-blown corrective move. Like I said, I think today's buyers were mostly a group that's in denial about how stocks ebb and flow. The next few days are going to be plenty interesting. By the way, while I don't want to get all the way into it today, I do want to point out something the Elite Opportunity mentioned today... gold prices are knocking on the door of new multi-year lows. While this alone wouldn't be too terrifying, as you can see on the chart of gold futures below, gold is making its third test of a major support line at $1143 per ounce. If the third time really is the charm and this is the effort that pulls gold prices below a major floor, there's no telling where the rout could end. Although we can partially blame the rising U.S. dollar for gold's weakness, truthfully, the U.S. dollar's rise isn't doing it by itself. I attribute a lot of gold's weakness to the simple fact that speculators no longer see gold as an effective way to hedge against inflation and global currency volatility. It's also just not chic anymore. (To that end, yeah, I think the bulk of the reason gold was so rampantly bullish between 2008 and 2011 wasn't because it was a calculated hedge but because it was a "must have" fad trade.) We'll dive deeper into gold at a later date. For today we just wanted to sound the warning. Why Any Pullback Should be Minimal We mentioned to you in Monday's newsletter we wanted to show you some reasons any pullback from here was apt to be small. We'll go ahead and start this discussion today, beginning with a look at two of the bigger reasons why we suspect the market won't give up a ton of ground... at least at first. For those of you that have been around for a while you'll remember the Arms Index or TRIN Index we talk about from time to time. (If you're brand new, here's the Q&D lesson.) Well, care to guess what's saying we're closer to an oversold situation than we are to an overbought situation? Yep, the 20-day moving average of the Arms Index for the NYSE's stocks. As you can see on the chart below, it's now close to levels associated with the bottom from late January, not to mention the low from early-2014 (solid red line). The TRIN is also already at levels associated with other minor lows in recent history (dashed red line). The other reason we figure any corrective move from here will be fairly limited is that we're getting close to (though we're not quite there yet) a capitulatory number of new NYSE lows. This is a continuation of a discussion we started way back on March 6th. Here's that newsletter if it doesn't ring a bell. Or, I can bring you up to speed very quickly by saying we're looking for a strong spike in the number of new lows the market gives us on any given day as evidence that a hard landing has been made. You may recall we didn't know what the exact right number was, but we had a feeling it was close to 400 new NYSE lows. With that in mind, take a look at the chart of the NYSE's new highs and new lows below. We've not reached 400 yet, but we're getting close. The number of NYSE new lows hit 344 back on June 29th. One or two more bad days could bring all this selling to a head and get it out of our system. We'll have a pretty good idea it's in the making when we get above 400 new lows, and better yet, closer to 500. Again, it's not an exact science. We're just trying to get a feel for things. It was something of an exact science, however, that pegged the S&P 500's first logical floor at 2013. In light of the new-lows trend and the TRIN trend, that rather shallow dip expectation (a move to 2013 would only be a 5.6% stumble) is starting to make a lot of sense. The only footnote we'll add here is that we're talking about the first wave of selling. It's entirely possible the Arms Index and the new-lows chart could be reset after one salvo of selling, clearing the deck for the market to make a move to a lower low later after a trade-worthy bounce takes shape. One day at a time though.