Existing holders have little to fear from today, and wannabe buyers will see this as the start of a buying pullback. The only index to keep an eye on is the Dow. Today's selling reversed the breakout and generated a 'bull trap', but this could also be viewed as a support test.
The Nasdaq 100 is another index threatening a 'bull trap', although the measure of the breakout isn't that of the Dow. Relative performance may be seeing a shift towards Small Caps stocks.
The Russell 2000 experienced a small loss which made little difference to either bulls or bears. Given the importance of Small Caps in driving bull markets, cyclical and secular, today's light selling looks better for bulls in the long run. This improvement is reflected in the relative performance of the index to its peers.
Tomorrow will be about containing further losses. It will be important the intraday range doesn't expand out and lead to an acceleration in selling. A spike low would be appreciative.
You've now read my opinion, next read Douglas' and Jani's.
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com, and Product Development Manager for ActivateClients.com. I also trade on eToro and can be copied for free.
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