The good news is the huge rally buys the bulls some room for maneuver. The bad news is it didn't change the picture too much with the exception of some MACD trigger 'buys' . The two sectors to watch for recovery are the Transports: Note the new triangle/wedge which closed yesterday on resistance. Can it break? Same for the tangle of resistance in the semiconductors: The job of breaking resistance looks easiest for the Transports, but the degree of work bulls need to build a recovery is clearest in the semicondutors. Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

The way the declines are shaping up, it is unlikely we will have the double bottom as initially suggested last week . For example, the sharp declining resistance line in the Russell 2000 should be a straightforward break - but the other lurking around 500 will be less so, and even then there is still the additional 75 points needed to mount a challenge on the neckline of a potential bottom. Only when that breaks would there be confirmation bottom. This looks a big ask for an index requiring a 30% rally just to get to the neckline.... More likely is a second scenario bottom with a neckline around 500 and a retracement back to either the lows of today, or whatever low gets tagged over the coming week. Large caps have available support to look too and haven't completely eliminated the double bottom scenario but with stochastics maintaining their bearish divergence and the small caps in freefall it is hard not to see large caps following suit lower. Get the Fallond Newsletter Dr. Decla

So far the indices have done well considering, but given how the selling has occurred throughout the week the stage has been set for a nasty Monday.... I have a post on Market Opportunities for a Global Panic over on the Zignals Blog . Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

Assuming another smack down at the open what will this mean for the double (now triple) bottom I was looking for ? It looks like it's a goner... The symmetrical triangles TraderMike talked about are about to set up measured moves down. To add insult to injury, all the Bullish Percents have switched negative after an all positive turn a couple of days ago. The real struggle is in tech. Since the second bullish piercing pattern had me looking for a double bottom the index has struggled to mount any sort of challenge on the neckline at 1,900. An 80-point gap down would make this toast. Watching Summation Indices for a 'Buy' as volatiltiy shapes a triple top: Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website

The Nasdaq and S&P each made a new lower close, but there were fewer stocks making new lows - implying strength. Although prior reversals were accompanied with spikes in the number of new lows, this association has not necessarily generated meaningful bounces. The double bottom is more tenuous, but it hasn't been thrown out the window. Demand exists at the two prior spike lows; there was a modest fight by bulls into the last hour of trading Wednesday. But one could also call for a break of intraday support of consolidation triangles - certainly a bearish turn (not helped by stochastics and Rate-of-Change at neutral levels). If markets continue their downward slide in the early part of Thursday's trading it will likely kill what chances existed for a bottom based on the double bottom idea. My latest Zignals post on the Variable Moving Average is available here . Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, marke

Bulls got another endorsement with all three Bullish Percents generating bullish crosses of their 5-day EMAs. The last of the Bullish Percents to turn was the Dow: What is clear is the distance to resistance; as an upside target I wouldn't look past this resistance until the volume accompanying the next rally is known. Monday's sell off didn't violate support but the nicked breakout of the pennant pattern of the S&P failed which places a question mark over the pattern broadening into a double bottom. The Dow and Nasdaq remain on course to create a double bottom. HeadlineCharts published an excellent chart showing the relationship between treasury yields, commodities and the S&P; this is playing to form. I drew a 4-year cycle chart of the relationship below with the textbook gaps between tops for each sector: Look for yields to rise first, then the stock market, then commodity prices. Get the Fallond Newsletter Dr. Declan Fallon, Senior Market Technician, Zignals.c

We are not there yet but markets are doing their best to shape one. Short term traders have an opportunity to trade long side to the neckline of a double bottom. Long term traders will want a neckline break to switch all trading within the double bottom pattern as a mix of supply and demand into all demand (i.e. anyone who traded through the double bottom pattern is now a happy long, or an unhappy short looking to cover/buy). Should(When) the Nasdaq make it to 1,900 I would watch for a gap open; this gap will turn the double bottom into a stronger island reversal. Large caps looking good too: Transports have additional support from the broadenig wedge with bear trap (good news for early recovery sector leaders): Vix has made a neckline double top (on a closing basis). Note bearish divergence in stochastics: Still fear of worse to come from the Hedge Funds which will keep the doubters sidelined until it is to late (or the bounce will be sharp enough to allow Hedge Funds to hang on bef