Friday was a solid day for indices with the Russell 2000 ($IWM) doing enough to push through its 200-day MA despite Thursday's bearish candlestick. Small Cap trading volume remained seasonally light, but Friday's buying was enough to retain the uptick in On-Balance-Volume and the relative performance advantage over both the S&P and Nasdaq.  Technicals are net positive as a result.  Aside from the lack of a meaningful pullback (test of support), this is solid action for the index.

After Monday's reversal candlesticks there were risks of 'bull traps' for the Nasdaq and Russell 2000, but today's gains have managed to negate not just the 'bull trap' risk, but also the bearish inverse hammer and doji from Monday.  In addition, the S&P managed to register a breakout.  The breakout in the S&P came on higher volume accumulation, although On-Balance-Volume remains on a 'sell' trigger.  The index has also accelerated its underperformance relative to the Russell 2000 - although this is more bullish than bearish for the broader market. 

It was a mixed day for indices with the first indication of a top for the current advance with reversal candlesticks coming into play off opening gaps in markets. The Russell 2000 is looking the most vulnerable as it finally manages to break past the June swing high. With the 'inverse hammer' we have the risk of a possible gap down Tuesday, which would result in an 'evening star' and a likely "bull trap" - feeding into the likelihood of a larger sell-off. 

There is still plenty of time before it happens, but given markets are making positive gains beyond the last major swing highs in (May)/June we have to consider the next major test of 200-day MAs.  Even if this proves to be a bear rally, each gain firms up the possibility that the June lows *are* the low for this cyclical bear market (the secular low was March 2009, and the secular bear market ended in 2013 - at least for the S&P). The Nasdaq is leading the indices having handily take out the June swing highs. Accumulation has been climbing with the rising On-Balance-Volume, and the MACD on a new 6-month high.  Stochastics are overbought, which you want to see in a rally (it's when stocastics [39,1] drift out of overbought territory you have to worry).

It has been a good summer for indices.  We have seen indices rally towards May-June swing highs in challenges which would help mark new higher highs on intermediate time frames.  On-Balance-Volume has also turned more bullish through July as technicals for the S&P, Nasdaq and Russell 2000 are net bullish. The Russell 2000 is also outperforming the S&P as more speculative growth stocks again attract interest over defensive Large Caps. 

With negative headlines still bouncing around we have the makings of a higher low.  Today's gains registered as higher volume accumulation for many of the indices, but now we need to see if buyers can push to new swing highs.  For the Nasdaq, we are looking at a close above the 20-day MA and a new On-Balance-Volume 'buy', following the earlier 'buy' in the MACD. In addition, we have a new relative performance uptick against the S&P.  Declining resistance is the next hurdle to overcome, but things are moving in the right direction.

Today's selling has started the retest of the June lows for the Nasdaq and Russell 2000 as the S&P gets rebuffed by its May low.  One point of concern is that none of the indices were able to mark a new swing high.  Nascent bullish technicals are also looking vulnerable to reversal. The index to watch is the Russell 2000.  If there is to be a recovery then the Russell 2000 has to do the leg work. Key here is that the index retains its relative outperformance to the Nasdaq and S&P - even if it suffers selling, as is likely from here.