Bulls do it again with higher volume accumulation follow through.  The S&P finished at a new high as it works its way towards the 10% envelope I define as covered call sell territory.

Disappointing action after bulls attempted to build on Friday's stall in the decline. The Russell 2000 had the best of the action as it suggested a breakout from the bullish flag.  Bulls could look to buy with a stop on a loss of Friday's low. The next challenge is to clear declining resistance connecting March and June swing highs.

Bulls didn't want to offer bears any confidence and Friday's low volume (small) gain was enough to keep them away. Optimist bulls could say Friday finished with bullish inside days/bullish doji - but such patterns only have merit in oversold markets, and this is not an oversold market. However, there are plenty of long term bulls (me included) who have limited skin in the game and are looking at opportunities to get in. I'm waiting for a 10% discount on the 200-day MA, but others won't be so patient and may look to nibble on Monday. For the S&P, the 20-day MA is fast approaching the market even if the S&P is dawdling down to the MA. The S&P may kick on once the 20-day MA is tested.

The 2nd/3rd day of declines has been relatively orderly so far. Volume picked up in distribution as many traders took easy profits from either the May breakout, or from positions taken during the earlier dip in January/February. A move back to 20-day MAs would be substantial enough to attract buyers back, and yet maintain the strong bullish momentum which has been a characteristic of the summer breakout. Even if there was a loss of the 20-day MA in the S&P there would be additional support to be found from the May breakout level.

Stockcharts data may be back, but there wasn't much to miss. Indices finally got a down day, but it was nothing to suggest it was anything more than the start of a consolidation.  Today's action was welcome, probably by both sides.  Overall low volume losses in the S&P could also be viewed as distribution at a pinch, but best to stick with the low volume thesis.

Unfortunately, stockcharts had a data feed failure, so no update for today.  But going on Yahoo data, morning weakness was bid up by the close, to leave indices more or less where they started. The morning buying again points to demand buying on any sniff of weakness. --- All Contributions Welcome - Thank You! Follow Me on Twitter Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com . You can read what others are saying about Zignals on Investimonials.com . JOIN ZIGNALS TODAY - IT'S FREE!

The advance in the S&P looks like it has the legs to make it to the upper envelope band, which marks a 10% gain on the 200-day MA, and a good place to sell covered calls.  Even if sellers were to make an appearance it would require large chunks of change to disappear in the space of a couple of days to shake what are stubborn shareholders out of their positions.