The Nasdaq frames this neatly. The rally has come off a bull defense of the 50-day MA on higher after a series of heavy volume selling days. MACD, On-Balance-Volume and +DI/-DI are in well established 'sell' triggers along with a sharp relative underperformance against the S&P. Bullish dip buyers will be pleased with today's action, but other factors are running against them.
Nasdaq breadth in the form of Percentage of Nasdaq Stocks above the 50-day MA, Summation Index and Bullish Percents all had cleared resistance, but these have since reversed from overbought levels. The question is how much downside (if any?) can be expected to follow from here. Oversold levels are a long way away, but all meaningful continuations generally follow a substantial pullback.
The S&P returned above support, and despite lagging a little behind Small Caps it's behaving strongly.
Speaking of the Russell 2000, it bounced above converged 20-day and 200-day MAs, but is doing so on the back of a MACD trigger 'sell'. Although momentum and relative performance is strongly in bulls favour.
For tomorrow, bulls should watch for continued strength from the S&P and Russell 2000. Bears will want to track breadth metrics for a reversal in expanding weakness.
You've now read my opinion, next read Douglas' and Jani's.
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Dr. Declan Fallon is the Senior Market Technician for ChartDNA.com, and Product Development Manager for FirstDerivatives.com. I also trade on eToro and can be copied for free.