Here we are — stuck in the middle.

Stocks have registered a strong bounce off their lows. The major averages have successfully recorded their first three-day winning streak since late March.

The pain inflicted over the past couple of months is beginning to fade from the front of our minds. What a relief!

But here’s the thing… There’s still work to be done!

The S&P 500 and Nasdaq Composite are both churning in the middle of a volatile range. SPY has to contend with resistance at 550. And the Qs have their own battle to wage near 470. Stocks aren’t free and clear just yet.

Naturally, this environment creates more confusion than clarity. Everyone’s already bearish (we know this from the sentiment survey data). But the market’s not in freefall anymore. Some of the upside moves are even beginning to stick.

The big question: Is it finally safe to close our eyes and buy?

The bears are hoping this is just another dead cat bounce — while the bulls are hoping to build their own fat stacks by trading some of the strongest snapback moves.

Today, we’ll attempt to sort through this mess to find out which is the right move.

Let’s dive in and see what the charts are telling us…

The Big Question for the Qs

Since tech names have been some of the most volatile on the market, we’ll be taking a closer look at the Invesco QQQ Trust (QQQ).

When it comes to tracking the current bounce, I’m most concerned with levels of horizontal resistance. These are the areas where the Qs broke lower on the way down — the same spots where it will need to overtake on the way back up in order to snap out of its funk for good.

The nearest area we need to watch closely is the 470-480 range. This is right where the Qs are approaching following this week’s bounce.

This area is important for a couple of key reasons. First, it’s just above the two big gaps lower from when the market was in free fall earlier this month. Next, it’s right in the neighborhood of the area that initially held as support following the first leg lower off the February highs, along with the relief rally that ultimately failed at the 200-day moving average.

If the Q’s can’t top 480, we could be looking at a dead cat — a failed bounce that will quickly resolve lower — possibly even retesting those penultimate lows from the first week of April.

If the Qs can get back into this middle range, the bulls can breathe a sigh of relief. But don’t get too cocky!

There’s still the late March highs to contend with just above 490. This just so happens to also be right where the Q’s were rejected at their 200-day moving average last month.

If getting between these ranges is a yellow light for the bulls, we can flip it to green once we see a significant close above 493. From this point, the playbook changes. We’ll have a better shot at playing breakout moves. We should also see more trading setups appear on the long side, with new market leadership emerging along with the snapback plays.

A break above this spot would be huge heading into May and Memorial Day. A great excuse to fire up the grill and welcome a more accommodating summer market!

But we’re not there yet.

The key to surviving these choppy periods in no man’s land is by keeping an open mind. Don’t assume that it will be smooth sailing from here…

There’s Nothing Wrong With Staying Skeptical

Bear market rallies stoke false hopes.

That’s why you’ll find the stock averages’ largest single-day returns (like the S&P 500’s 9% gain earlier this month) follow steep selloffs within an ongoing downtrend. For instance, the Great Financial Crisis produced swings exceeding 10% during the fall of 2008.

Remember, you don’t have to marry your position. There’s nothing wrong with changing your mind when price flips in a new direction. That’s how experienced traders book consistent gains — when the market changes, they adjust to the new reality.

We’re beginning to see evidence emerge indicating that this week’s bounce might stick. That’s great! I’ll continue to search out trade candidates that have the best chance at outperforming during the bounce.

But I’m going to remain a skeptic of any and all rallies at the index level until we can clear critical resistance. This is the only prudent move to make right now!

Don’t get caught off guard. Only the attentive and nimble traders can thrive in this environment. Make this your top priority as May approaches!