There's an argument raging across trading desks at the moment. Global share markets have rallied back from lows hit between Christmas and New Year. The lift in major indices in many cases is in the range of 5%-9%, over just a handful of trading sessions. This very substantial move has divided traders. Some claim this is a corrective rally in a downward trend, others argue this signals the end to the downward momentum and the beginning of a new up trend.

Who's right?

None of us know the future with certainty. However in times of muddy fundamentals (US/China trade, Brexit, global growth outlook) the price action may provide answers. The US SPX 500 index is one of the key global indices, and both reflects and influences overall global trends. The daily chart (above) may provide crucial clues.

The horizontal black line is the 2018 low at 2,532. In recapturing this level the SPX has turned more positive, at least on a technical basis. However there is a key resistance level around 2,585 (green line). In my view these are the key levels. A breach of 2,532 suggests downside momentum resuming, and a push up through 2,585 points to an emerging up trend. I'll leave the argument to other traders and let the price action tell me which way the market is headed.

The red indicator at the bottom of the chart is the Average True Range (ATR). This volatility indicator shows how market behaviour changed at the February 2018 sell down. The ATR previous to the sell down ranged between 20 and 30 index points per day. In the last two weeks it hit a peak near 70 points. Now its eased from those highs. Generally volatility rises as markets fall, and falls as markets rise. The modest decline in the ATR over the last few days could be an early indication of a break to the upside.