The comments below were provided by Kevin Lane of Fusion IQ.

As seen on the daily chart of the S&P 500 below, the Index is at the lower end of its support zone (purple lines and arrows). Given that the Index is already qualified as oversold (i.e. down 8% from its peak), it is even more important that it should hold. If the rally off the bottom remains intact, an 8% sell-off to support should be met with enthusiasm by buyers.

If buying doesn't materialise down here, it tells you a lot about the psychology of traders and we are likely to see the market continue to drift lower. It is really important for the bull argument that the market takes some type of stand here.

As this is peak vacation time (July to August) we would expect trading volumes to taper off slightly, making liquidity a bit of an issue.

sp500-index-spx-s

Source: Kevin Lane, Fusion IQ, July 13, 2009.