Markets made a reasonable stab at recovering yesterday's losses. Markets gapped higher at the open, but they weren't able to build on the opening gaps. Small Caps edged the gain winners, adding just over 1% on the day. However, semiconductors had a very good day: adding 2.4%, closing above the 50-day MA and a minor channel support level - leaving behind a 'bear trap' in the process.  This should help the Nasdaq and Nasdaq 100 and offer a good opportunity for some upside follow through.

Friday's buying was quickly unwound at the open following sizable gaps down. A late afternoon surge regained some of the lost ground, but indices still registered losses of over 1%. Not surprisingly, technicals continued their decline. Volume was heavy, but below that of Friday's. The S&P is caught in a bit of a no-mans land, but there is reason to suggest it could mount a rally to challenge its 20-day MA: daily technicals have crept into oversold territory and there is a nascent bullish divergence shaping up in the MACD histogram.

Last week's response to the Fed nixed the attempted recovery in breadth metrics.  The Nasdaq Summation Index was the one breadth indicator not to react to the Fed, and is some way from entering swing low territory: it hasn't even entered negative territory.

Well, in the end there wasn't much bulls could do. The day opened weak and just got worse as the day wore on. There was a clear slice of channel support where such support existed. In addition, volume climbed to register a firm distribution day. There is probably 2-3 days of gains required just to make back what was lost today - and today was a big miss. The S&P overshot horizontal support at 1,597, which may offer a point of defense tomorrow.  If this was the case, I suspect it will be a late morning rally which does the leg work in some form of bullish piercing pattern. However, technicals turned net bearish on the sell off.

The Fed induced sell off undid the gains generated by bulls yesterday, but the selling wasn't enough to write off the breakouts altogether. However, another day of selling tomorrow will lead to breakout failure, trapping those buyers. Bulls aren't totally out of the picture - the breakouts haven't failed, and indices are closer to support. Buying at the open with a tight stop could be an interesting day trade: the S&P illustrates the long side potential with a stop on a break of the 50-day MA which is also channel support.

In the run up to today's Fed announcement, markets made an early break past resistance - following the S&P's lead, which made its break on Monday. The semiconductor index posted the most significant move, as it was able to close at a new multi-year high. The gain was enough to reverse the bearish cross is +DI/-DI (although with a weakening ADX, the importance of such a cross is reduced).  The break is also good news for the Nasdaq and Nasdaq 100, as they seek to make new multi-year highs of their own.

Okay, bulls couldn't hold all of their gains by the close of business, but their attempts at breaking the consolidation still have merit.  None of this changes the overbought condition of breadth metrics , but it suggests a mini-rally could emerge before breadth is again in heavily overbought territory. The S&P managed to edge a break of declining resistance on confirmed accumulation. Bearish technicals remained bearish, but the net technical picture is still bullish.