Yesterday was a bit of reverse from my expectations. Had I seen a gap down with a 2-hour sell off, followed by a steady recovery to the (same) closing price, then I would have been much happier.  As it stands, there is a risk the selling could drift into today and keep buyers away until markets get closer to last Thursday's lows. Having said that, it does look like Thursday's lows will mark a strong support level. The profit taking which took markets down did knock breadth metrics down near, but not quite at, oversold levels. The Nasdaq 100 perhaps offers the most natural support as marked by the rising channel.  The 20-day MA is providing some supply, and if the index was to reverse and undercut the channel then this 20-day MA will become a shorting zone. The nearby presence of the 50-day MA complicates this a little as it has held as support (in conjunction with channel support).

Bulls will not doubt have danced a little jig of joy on Friday's close, but as Thursday's selling ultimately proved, the lack of volume will place a big asterisk next to it.  That's not to say there aren't areas of importance to watch. The Nasdaq has set up a defense line which will offer bulls a place for stops: a loss of 4,320 (on a close basis) would kill the nascent swing low in development. Stochastics haven't converged at oversold levels, so there may yet be a small bounce back to the 20-day MA before another push lower. Even so, buyers probably have more to gain from here forwards.

It has been a struggle between bulls and bears for the past week; each day alternating between buyers and sellers. Today belonged to sellers. Volume was lighter than yesterday, marking a lack of conviction on the part of sellers to drive the market lower. The index best positioned to bounce on Friday is the Dow. It finished the day very near the 200-day MA, offering a natural entry point for buyers. The Nasdaq was rebuffed at support-now-resistance and currently has a target of 4,245 and/or the 200-day MA.  Stops/Risk measured on a close above 4,380. The Russell 2000 was rebuffed from newly drawn channel resistance. Lower prices with a May low retest looks probable. Finally, the Nasdaq 100 is another index trading close to channel support and the 50-day MA. It's another good long candidate for Friday. For Friday, look for long opportunities in the Dow and Nasdaq 100. A weak open should look for short opportunities in the Russell 2000 while the downward channel

There is still a net decline in lead markets, but the crash-and-burn style headlines have yet to crack the resolve of bulls. The Nasdaq 100 found support at its 50-day MA, which itself is just above channel support. As the index is outperforming the others it's the one most attractive for bulls looking at the 'easy play'; stops on a close below channel support.

Monday's rally was brief and didn't trigger any follow through. Sellers pounced, hitting Large Caps hard, but leaving no index unscathed. Volume climbed to register distribution for the S&P, posting a new low for the July/August decline and came close to a potential new closing low. The 1,900 level is looking like the next stop down: watch for an intraday tag as this could be a good day trade on the bounce.

In previous sell offs, buyers have quickly come to the fore to buy-the-dip. They weren't so encouraged on Friday with buyers struggling to meet the supply created by sellers. Buyers still have a chance to strike with available support, although the amount of risk required to take such a position has widened. The indices closest to support, like the Nasdaq, finished with an opportunity at converged July swing lows and 50-day MA. A loss of the Friday low is the place for stops, although there is a good chance this low could be taken out on (probable) Monday (morning) weakness.

Whatever tentative bullish plays were available before the start of the day were quickly put to rest by the close of business.  Where I thought the Dow might offer shorts the most reward, it was the Russell 2000 which suffered most. The Dow actually managed to close on a support level - although it probably doesn't look like it.