A good day for indices saw sufficient strength for 20-day MAs to be tested. The Russell 2000 had the best of the action; it gained 1.7% to close the gap to its 20-day MA and bring the index to former declining resistance (since weakened by the 'bull trap').  However, there was a more significant relative strength change towards Small Caps and away from Large Caps and Technology - this is a more bullish development if the rally can advance past the June swing high.

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Markets continued their advance off Monday's swing lows, keeping things on course for a test of 20-day MAs (and for some, 50-day MAs).  One index has already tested its 20-day MA: the semiconductor index. It started the day just shy of its 20-day MA, but was unable to advance beyond it, closing just a few points lower. However, it is trading comfortably above its 50-day MA and channel support. How it fares tomorrow will govern how other indices react to it.

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.