It was by no means a disaster but there was an ominous feel to Wednesday's close. Bulls had used the momentum built by last week's gains to make a run at all-time highs but profit takers and shorts used this as an opportunity to get out/build a position. It's a typical stage I reaction to a resistance test but now it's a question if there is enough sideline interest from bulls to drive a break to new all-time highs and force today's shorts to cover. The S&P left a small 'bull trap' on low volume. Technicals are net bullish so if bulls can come back and reverse the 'bull trap' it would nicely set up a run to test newly drawn channel resistance. But for now, shorts look favoured.

The past couple of weeks have been a period of give-and-take but Friday broke the mold by marking a second day of gains for many of the indices (four for the Russell 2000). More importantly, it took markets above resistance and into a position where they can mount a challenge of June highs.

Tuesday delivered another shift with sellers coming back, although not to the same extent as Monday's buying. The net result was to leave trading ranges in key markets. Until there is a break we won't know where the nest move will come but it will keep people on the sidelines until there is a resolution.

In yet another turnaround for markets, today started with a large gap down which had the makings of a sizable bearish sell-off - only for bulls to start buying from the open and to continue to do so throughout the day.  Better still, today's surge undid much of the damage done Friday. For the S&P, the action over the last six days has much in common with the scrappy action around the 200-day MA in March/April. The only thing I don't like about this action is the frequency of the tests of the 200-day MA; the more frequent the tests the greater the chance for a break. A move above the 20-day MA should be enough to confirm a new swing low and deliver a challenge on resistance of the June swing high; riskreward measured on a loss of 2,690.  There was even an uptick in relative strength against the Russell 2000.