Two days of selling has finally put a stop to the accelerated gains from December but it should also provide an opportunity to shake the weak hands out of their positions and set up a more sustainable rally. The nascent breakout in the Dow has been undone by the fall back inside the prior channel, leaving in its wake a 'bull trap'. Shorts will use the 'bull trap' highs as a place for stops.  Typically, 'bull traps' from channel breakouts go all the way and drop out the other side - this would be a secondary shorting opportunity but we are not there yet.

Another firm round of gains across all markets kept things buoyant. The Dow managed a fresh breakout from channel resistance on higher volume accumulation.  This has the look of yet another channel acceleration as the chance for a parabolic blowout increases.

It's a bit of a grasp given strength across markets but the Russell 2000 may be shaping a bearish wedge. There are three tags of resistance but it's rising support anchored by the two 'bear traps' which suggests a possible wedge. Today's bearish engulfing pattern also contributes.

The Nasdaq joined the S&P at historic highs as it hit the 15% zone of historic price extremes (relative to its 200-day MA). The S&P went a step higher as it touched the 10% zone of historic highs; i.e. it trades at levels above 90% of historic price action dating back to 1950 - a sign there isn't much left to this rally. If it makes it to 2,874 it will be in the 5% zone, a zone last seen in February 2011.

Last week saw the S&P hit the 15% of historic price action where it has been 10.7% or higher above its 200-day MA since 1950.  As of Friday, it's only 0.3% away from hitting the 10% of historic price action; i.e. over the last 68 years the S&P, 90% of historic action has been lower than where the index sits as of Friday's close - i.e. heavily overbought. This is time to be taking profits and/or selling covered calls on existing positions. Volume climbed to register accumulation as other supporting technicals give no indication of potential weakness - so those waiting for more upside don't have much to suggest this won't happen.

The Nasdaq 100 breakout cleared channel resistance, the fifth significant breakout in four months. All technicals are posting new near-term highs which also meant the short generated on the tag of the rising channel is negated.

I forgot to mention last week that the S&P has reached the "15% of Profit Take" zone of historical price action relative to the 200-day MA dating back to 1950. If it reaches 1,653 it will be in the 5% percentile of historic action - a 'strong sell' signal.  The price tag came with a fresh breakout from the channel; the second breakout in 2018.

Another day of gains pushed Indices to new highs and offered a breakout from the accelerated channel for the Nasdaq but it was the Russell 2000 which took the biscuit. The Russell 2000 added nearly 2% as buyers swooped in to take advantage of recent quiet action.  This follow on to the recent breakout sits the index up nicely for further gains.

Since redrawing channel resistance the S&P, Nasdaq and Nasdaq 100 now find themselves up against (accelerated) channel resistance. This may be viewed as an opportunity to take (partial) profits and/or sell covered calls.  Buying volume for the S&P was modest and technicals remain strong but some pause in the buying would look preferable at this point.

The S&P broke upside from one channel to leave it another. This is the third such acceleration in the last six months, leaving the index prone to a parabolic (if not profitable) run. Buying volume was low, but technical strength is good.

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Will this be third time lucky for Semiconductor Index short traders? The last two short trades at the 50-day MA have failed so will the narrow doji at 'bear flag' resistance offer a new opportunity for shorts to reverse the two prior losses? It should be noted, technicals do not support a short position but a stop can be run tight to 1,321 highs as any gain from here will break the 'bear flag'.

As the new year picks up speed traders are returning to a new round of fresh buying. It looks like the last trading day of 2016 selling fade is history as potential shorting opportunities generated by it are reversed. For example, the 'bull trap' in the Nasdaq was blown away as the index closed at new all-time highs. This buying was enough to reverse the MACD trigger 'sell' and accelerate the bullish technical performance of other indicators. The faster upper channel line is the new target as the older, slower one was breached on today's close.

It wasn't a big sell-off but there was a downward break of the bullish squeeze in the Russell 2000. It was associated with a MACD trigger 'sell' although this had effectively flatlined from the middle of December. It will be important for support to hold at 1,500 but aggressive shorts could look to enter here with a stop above 1,550 (or longs could decide now is the time to take profit). When traders come back from their break this weakness could accelerate and you don't want to be on the wrong side of the trade.