Things will be cooling down a little heading into the Christmas break, but Friday offered bears a huge boost with significant distribution and technical reversals.  Few indices escaped the selling. The Nasdaq lost rising support, and undercut its 200-day MA in a ,move to set to challenge the swing lows of November and December. The 4,900 level is a critical level for the trading range as a loss of this would open up for a retest of the August/October swing lows.

It was set up for bears to challenge with markets running close to moving average resistance, but in the end, bulls were able to push a break and pressure shorts. Volume wasn't great, but it's a start. The S&P closed above converging moving averages of the 20-day, 50-day and 200-day. There was a 'buy' trigger in On-Balance-Volume too. The index also stretched its relative advantage against the Russell 2000.

After an extended period of under performance for the Russell 2000, today saw it gain over a percentage point and close near the day's high. It's a positive response to the test of former channel resistance turned support, but it will have to watch supply as it approaches the moving averages.

The early selling wasn't able to force prices lower and bulls were able to stage a recovery by lunch time which accelerated into the close. Large Caps and Tech are well placed for a rally in the near term, but the Russell 2000 didn't make the cut. When the S&P gets back to (converging) 50-day and 200-day MAs it will find itself up against supply generated by these key moving averages.  However, there is room for upside before then.

The Russell 2000 took a big hit on Friday, generating a loss of over 2% as the index stayed within the 85% percentile of weak prices going back to 1987. This is a five month stretch of underperformance for this index and is an opportunity for buy-and-holders to accumulate Small Cap shares. From a trade perspective, the Russell 2000 is down at former declining channel resistance and potential support.

Bulls needed to do more after a decent start petered out by the close of business. While markets did finish higher, they did so only on modest volume. The Nasdaq had its 'Golden Cross', but it didn't see a test of this moving average cross. Given the weak finish, the test could occur tomorrow.

Today's action was more decisive towards bears, with volume rising in confirmed distribution. The Russell effectively confirmed the trendline break and now looking at the 1,140 swing low which marks support of its trading range.  Should this be lost, then next step is a move towards 1,080. Technicals are all aligned in bears favour.