Stocks reversed dramatically in the final hour of trading yesterday, to end the session mixed. Trade was brisk across the board. All of the major indices were down by 1.2% or more intraday, before the market staged its impressive comeback. The S&P MidCap 400 showed relative strength, as it fought its way back from early losses to post a 0.3% gain. The small-cap Russell 2000 ended the session flat, while both the DJIA and the S&P 500 posted modest 0.2% declines. The Nasdaq also made an impressive recovery but still finished the lower by 0.9%. At one point during the session, the tech-rich index was down by 2.0%.

A quick review of the S&P 500 and the Nasdaq should provide a compelling visual, as to the strength of yesterday's reversal.

The S&P 500 quickly lost support of its 20-day EMA yesterday, and appeared ready to test its four day low. However, after setting the intraday low around 2:30 pm, the S&P rallied in the last hour of trading to close near the day's high. Above the two day high of 1334, the S&P 500 should see resistance at 1340 and 1364.



The Nasdaq also recovered strongly. The Nasdaq appeared to be in big trouble when it lost support of the four day low. However, the tech-rich index also closed near session highs. The Nasdaq should now find resistance at its 20-day EMA (2862), the two day high (2898), the 50-day EMA (2897) and the June 20th swing high of 2942.



Although both the Nasdaq and the S&P 500 still face formidable overhead, yesterday's price action suggests to us, that market bears may be about to cede control at least for a while.

Yesterday provides an excellent case for why we ignore the news. Early in the session, the "talking heads" were clamoring that the market was sinking due to "the Supreme Court's decision on health care reform." However, by the closing bell, the market had staged an impressive bullish reversal. Was this reversal also a result of the Supreme Court's decision on health care reform? News doesn't drive the market, the market drives the news. The news media merely observe what happens in the market and then create a story in an attempt to provide an explanation. Why does there have to be an explanation? That's why we just follow the tape.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.