Markets started brightly but that was it, heading into the final hour of trading it turned into a bit of a freefall. The Russell 2000 ($IWM) took the worst of the pain, leaving behind a very bearish looking inverse "hammer". There are prior 'sell' triggers in the MACD and On-Balance-Volume, along with an underperformance against the Nasdaq. It's hard to see things opening brightly tomorrow, but if bulls can make a stand into Friday's close it might alleviate some of the selling pressure building in this index.

It was a bit of a so-so day for markets. The Russell 2000 ($IWM) had the best of the action as it negated a nasty bearish engulfing pattern from Friday, and now has a new opportunity to make a run at the $225-7 zone that delivered the October reversal. It will need an improvement in supporting technicals for the challenge to succeed as the MACD, On-Balance-Volume and +DI/DI all on 'sell' signals, along with an underperformance relative to the Nasdaq.

For a while, it was looking like bulls were going to deliver on the pent up demand that is lingering in the market, but for now, this is on hold for another day. I had talked about the potential bearish case for the Nasdaq in my last post , and in early trading I had thought this effort was going to do to waste. But the bearish case remains valid as of the close of business on Friday. The Nasdaq has a MACD trigger 'sell', to go with higher volume accumulation, off a bearish "gravestone doji". The index has continued to accelerate its relative performance against peer indices, and if it can post a gain early next week it may yet put to bed the bearish case for this index; a close above 18,700 should be enough.

While indices are pushing towards new all-time highs there's a case where a larger decline could emerge despite recent benign losses. The first thing to look at is breadth metrics. In the case of the Percentage of Nasdaq Stocks Above the 50-day MA ($NAA50R) has moved back to trendline support, but supporting technicals show 'sell' triggers in the MACD, CCI and +DI/-DI. Further loses hwere would trigger a breakdown.

At its simplest, the Russell 2000 ($IWM) breakout to new highs has faded back to its 20-day MA on low volume. This could be considered a "bull trap", but I would be prepared to give the 20-day MA a chance for bulls to mount a defence given the narrow range of today's candlestick. Technicals remain net positive - another reason for optimism - although the index continues to underpeform relative to the Nasdaq.

Wednesday delivered the long awaited breakout in the Russell 2000 ($IWM), and while we didn't get the follow through higher, we did see buyers maintain breakout support. Friday's selling volume ranked as distribution, but it was not particularly heavy volume overall. Technicals didn't lose much ground over the two days of selling and remained net bullish. The S&P is looking a little vulnerable with Friday's doji forming a bearish 'harami cross' against Thursday's broad candle - a reliable reversal candlestick pattern. Adding to this is an overbought market condition alongside a new relative reversal against the Nasdaq. Look to premarket for leads; a gap down at the open would effectively set up a short play. The Nasdaq also closed with a bearish harami cross just below resistance. Like the S&P, it will be vulnerable to a gap down. Needless to say, look to premarket for guidance. Another chart to watch is the weekly S&P. W...

The Russell 2000 ($IWM) joined the S&P as managed to push to a new closing high (although just shy of a new all-time high). This has been a 3-year journey for the index, and marks an important milestone as part of the secular bull market continuation - which kicked off in 2012 - but started with the generational low in 2009. Only the Nasdaq is left to join the party. In addition to the breakout, the Russell 2000 ($IWM) enjoyed a return to relative outperformance against the Nasdaq, and booked two consecutive accumulation days to add to the net bullish technical picture. All good here.