While the near 500-point reversal of Monday's equity market temper tantrum may have people scratching their heads asking ‘if failure to pass a bailout meant the end of the world, why did we recover?’ those technical traders who prefer to block out fundamental noise and simply look at the numbers may have a different take.
Tuesday's huge rally in the Dow Jones Industrial Average allowed the index to settle above the important 50% Fibonacci retracement level of the bull market that began at the end of 2002. Measuring from the September 2002 low (on a monthly close basis) to the October 2007 high, the Dow had dropped more than 50% until yesterday's rally pushed it above that important benchmark. This is generally seen as positive for the market.
However, Tuesday's recovery did not push the broad market S&P 500 above that 50% retracement level, which may present a problem to technicians.
