The early morning dive across markets took the S&P and Dow Jones Index down to their respective 20-day MAs. All indices were able to recover by the close, but not before triggering technical 'sell' signals for MACDs for the aforementioned indices. Bull can take comfort from the sharp drop in trade volume; it was well below that of last week and didn't rank as distribution. Today's touch of the 20-day MA in the S&P looks like a successful support test, but should there be a second test this week then it will likely break and the 50-day MA becomes the next support level. Trading in the Nasdaq was more robust. The index was able to close inside Friday's range and is well above its 20-day MA. Technicals remain bullish. Because the Russell 2000 didn't suffer the same losses at the open it did close down, although the net loss from Friday was slight. Monday's trading is in line with typical bullish behavior; i.e. small losses on low volume...

The past week saw some significant moves despite the weaker Friday close. For the indices there was a breakout in the Russell 2000. This cleared the former neckline and brought the index into the congestion zone of the early part of 2011. The Nasdaq also edged a breakout on higher volume accumulation, although the real challenge is the 2011 high. Supporting the break in the Nasdaq was the break in declining resistance of the Percentage of Nasdaq Stocks above the 50-day MA: The Nasdaq Bullish Percents also cleared declining resistance at 58%, leaving room to maneuver to the next (minor) level at 65%. Along with declining resistance in the Summation Index. The S&P built on its breakout from last week with another gain on higher volume accumulation This followed similar breaks in S&P market breadth. The weekly picture continues to look good for bulls. Last week's breakouts in the S&P were followed by breaks for the Nasdaq and Russel...

Today was the first distribution day for the year in the S&P and the second for the Nasdaq.  Despite the selling there was little change on the nature of the rally. A sequence of selling would obviously change this, but today offered little more than profit taking. Selling in the S&P retraced some, but not all of yesterday's gains. If this is the start of a longer decline then the 20-day MA is the likely support area for buyers to make their next appearance. The Nasdaq is in the same position, although there is a support level at 2,737 which may play as an alternative for buyers to step in. The Russell 2000 also has the benefit of the 20-day MA which has converged with 764 support to help buyers. The extent of today's selling volume is likely to see some follow through tomorrow. Not until 20-day MAs are tested will the integrity of the rally be known. ------ Follow Me on Twitter Dr. Declan Fallon is the Senior Market Technician and Community ...