Todd Gordon On Whether Stocks Are Benefiting From Short Covering Or A Recovery

The S&P 500 index ended the prior shortened week with its best percentage gains since 1974m and what's next for the market is "the biggest question on everyone's mind," Ascent Wealth Partners Managing Director Todd Gordon said on CNBC's "Trading Nation."

Short Covering Or Recovery?

Gordon questioned whether last week's stock market surge was a function of short sellers covering their positions or the start of a recovery.

If recent trading action was short covering, stocks could potentially "take us through the lows," he said.

If it is a recovery, stocks could have formed a bottom, making them ready to move back up, Gordon said. This would be in part due to the "unprecedented economic stimulus packages" from Congress and the Federal Reserve, he said. 

S&P 500 Price Action

The S&P 500 bottomed on March 23 at 2,191 and has since bounced back roughly 25% higher, he said.

Despite recent momentum, the index is still far removed from its all-time high of 3,393 on Feb. 19.

"We're right up to the 50% price retracement at 2,796," he said. "This 61% which is another key level is at 2,939. So, altogether, this is your zone of interest where a possible failure, if this a bear market rally, might occur."

Gordon Says He's Becoming More Bullish

For now, the odds of stocks climbing higher or testing new lows is 50-50, Gordon said, adding that he has become more bullish on the prospects of a recovery and has been allocating capital to stocks.

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