The S&P and Dow Jones is tightening into a coil, and coils typical lead to big reactions. It could be a few days before the coil is tight enough to spring, but both markets are consolidating on declining volume. However, the Dow edges in favour of bears with some distribution days in the mix, although it's countered by a MACD trigger 'buy'.

An erratic response which saw rapid gains followed by a return to earlier selling left markets struggling for traction. A move to retest lows looks favored, but selling volume was lighter which suggests bears may be running out of steam. The S&P had climbed out of oversold levels, which means there is a room to return to such conditions. The S&P hasn't yet done enough to generate a higher low.

Traders hadn't forgotten the events of last week and were quick to sell their positions in the face of tomorrow's NFP data. Today's close in the S&P left a bearish inverse doji (gravestone doji), marking supply above 1,950. Bears will feel confident heading into tomorrow's data, assuming Thursday's 1,975 high is not breached. The downside target is a retest of 1,867. A move higher will set up a challenge of 2,044.

After the late recovery last week, sellers again made markets their home. Sizable losses were accompanied with higher volume distribution, although volume was down on earlier panic.  Another pass at August lows looks likely. The S&P is again heading to the 10% 200-day MA envelope. Relative performance is shifting away from Large Caps to more speculative indices, which is bullish in a rising market, but in a falling market suggests a lack of sanctuary.

Bears took it upon themselves to press their advantage into the close of business. Selling volume was light and lacked the conviction that had accompanied the rout of the previous week. The S&P is caught in a no-mans land, with a retest of 1,867 likely needed at some stage to rebuild confidence on bulls.

After all the volatility during the week, Friday's action was a little reprieve. Markets sit a point where shorts will fancy their chances, although further upside should not be viewed as surprising given the level of volatility markets experienced last week. If there is an indication bears are going to come back with a vengeance, it's that buying volume has been well down on prior selling. The Nasdaq finished on former trading range support, turned resistance. Watch for a short squeeze from this level, up to the 200-day MA.

A second day of gains keeps pressure on shorts in squeezing them out of their positions, but is also looking to sucker shorts into trying to second guess when this rally will end. The S&P is heading fast towards 2,044. Given the speed at which it has enjoyed this advance it will be there by Tuesday! In reality, it will likely slow before it gets there. When markets do head lower it will be important they do so slowly to sow further doubt into shorts.