In day when Alibaba took the headlines , it was left to the Russell 2000 and Semiconductor Index to warn of potential change. The Russell 2000 experienced a large bearish engulfing pattern, although within the boundaries of the declining channel. There was an undercut of the 200-day MA, which will need to be watched on Monday. Shorts could get aggressive with a stop above 1,164 (and/or declining channel line).

Bulls had another good day; a third good day in a row.  The Dow capped the day with a breakout into what could turn a larger measured move higher. Volume rose in accumulation, and residual bearish technicals were negated on the move higher.

It was a roller coaster day, but the Semiconductor Index was the one to finish with an edge to the bulls. It looks like a break of 652 will happen sooner rather than later, with the swing low at 631 a handy place to mark risk (for a stop).

The bullish reaction was swift and strong.  Shorts who took advantage of the break of support were quickly put on the back foot. The S&P regained 1,987 support and delivered a breakout of the declining channel. Technicals will take a few days to recover, but relative strength took a sharp swing in Large Caps favour.

Headlines may have suggested otherwise for markets, but Small Caps had a rough day. The Russell 2000 lost over 1% in a slice through both 50-day and 200-day MAs. It's ugly because Small Caps have to re-establish a new price channel and each daily loss makes this new channel less and less bullish. Technicals are not net bearish, but they are not looking good either.

It was a second day of heavier volume selling in four for the S&P, and the fifth day of distribution since the last accumulation day. The breakout of 1,987 was undercut by Friday's close in addition to a finish below the 20-day MA. Bulls still have room for maneuver with the 50-day MA next in line for a test; even a modest rally Monday would be enough to return the S&P above its breakout.  The higher volume selling is a concern, but not a deal breaker for bulls...yet.

It was a modest day for the S&P, Dow and Nasdaq indices, but it was a better day for the Russell 2000. The recovery in the Russell 2000 after the channel breakdown took a big step forward as it worked itself off its 50-day MA and finished above its 20-day MA. The breakdown remains, but this will likely shape itself into a broader (more shallow, and therefore more sustainable) rally.