Index bounces reach a pause point

The relief bounce for indices finally hit the first potential reversal point with 'black' candlesticks in the S&P and Nasdaq, and a bearish harami cross for the Russell 2000 ($IWM).

Trading volume in the Russell 2000 was lighter than previous days, a positive sign for those looking for more from this bounce. Momentum indicators have moved out of an oversold state, although I like to see a cross of the mid-line before I consider the situation to be under the control of bulls.

The S&P closed the day with a more bearish 'black' candlestick, a common reversal candlestick on a bounce, but more so at a new high. Technicals are weak and net bearish that increases the chance for a bearish reversal. Watch for a gap down on the open.

It was a similar story for the Nasdaq as for the S&P; a bearish 'black' candlestick on net bearish technicals.

If indices do start heading lower, watch for the measured move targets which for the Nasdaq and S&P are close to their respective 200-day MAs. The Russell 2000 ($IWM) target is near breakout support from December.

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Investments are held in a pension fund on a buy-and-hold strategy.

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