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US indices: a new bull run or a bounce in a longer-term bear trend?

Stock markets bottomed out at the end of last week as predicted. This week has seen the recovery as expected but is this recovery the start of a new bull leg higher or a bounce in a developing bear trend?
Whilst it was great to see stock markets bottom out right on cue last week followed by a very strong recovery as we had hoped, I don’t think this is the start of another big bull run. The charts are actually a little confusing with quite mixed messages, so I have to throw in some gut feeling to today’s technical analysis outlook. However let’s start by looking at one of my favourite markets in the Emini S&P daily chart.

You can see a very strong bounce off the double bottom last week which burst back above the 200-day moving average (red line). You can see just above yesterday’s high that we meet the 100-day moving average and a trendline resistance area at 1956/1958. Although this would be a nice area for profit-taking on longs and trying short positions to see if the bear trend resumes, I don’t think we will get the chance to try these trades. I have a feeling the bounce has now run its course and bears  can sense that they are starting to gain control of stock markets. A dip back below support at 1905/1900 would help to confirm a more negative outlook. A weekly close below this area on Friday night would be further confirmation of weakness expected into the end of October.
The Russell 2000 has been developing a bear trend from as far back as July but don’t forget we also have that big double top pattern which built up over a four-month period this year. I think this will continue to dominate the longer-term outlook and keep bears in control of this market also. The daily chart shows the last four months and it’s clear from this alone that we are developing a bear trend.

The Emini Nasdaq is more of a positive picture with a bear trend less developed and we will need to see if this market does top out this week to confirm a more negative outlook. We would at least need a weekly close tomorrow night above the 100-day moving average at 3940/35 to give bulls a chance. However I think more likely is a sell-off into next week risking a test of October lows into November.

I am going to finish off with a look at the Emini Dow Jones daily chart. A strong bounce here has taken us back to the 200-day moving average at 16540 and trendline resistance at 16585. My feeling is this area will mark the high for this bounce and we will turn lower again to signal a bear trend is now developing. I am concerned that if I am correct about these bear trends, we could be facing significant and continued losses into 2015.
 
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