It was a classic technical bull trade but somehow bulls contrived to make a mess of it. It's not all lost, but the gap higher which quickly reversed and weakened throughout the day doesn't leave much room for maneuver.  For the Nasdaq and S&P there were bearish engulfing patterns of Thursday's bullish hammers.   Thursday's doji in the Russell 2000 was similarly engulfed by Friday's selling.  The net result is to expect further losses when traders return to their desk on Tuesday.  Stochastics for the Nasdaq haven't yet reached an oversold level which is a little troublesome given the extent of losses leading into Friday's losses.  The opportunity for the momentum rally at the stochastic mid-line is now off the table - so now we have to look at the possibility for a bottom when stochastics do finally reach an oversold state. 

If there was a setup for a bullish reversal in the indices then today was the day.  The Russell 2000, Nasdaq and S&P all closed with bullish reversal candlesticks down at the 61.8% Fib retracement of the move from June through August.  However, any further loss would open the possibility for a complete retracement to the June low. The Russell 2000 finished the day with a doji on higher volume distribution.  Stochastics finished just below the mid-line, resulting in a net bearish technical picture - but these same stochastics are at a level where rallies in bull phases occur (the Russell 2000 having jumped to the bullish side of this equation in July).

I've been looking for these tests of 50-day MAs since the reversals off 200-day MAs.  These tests have coincided with moves into 50% Fibonacci levels which increase the possibility of support kicking in.  While the tests of welcome, the 'how' of these tests is less so. Ideally, I would like to have seen more bullish candlesticks, but this was not the case. The Nasdaq had a standard bearish sell off on confirmed distribution, with the added trouble of a return of net bearish technicals. If I had a preference, it would be for a 'bullish'  hammer with a close above today's close. 

There was no doubt which side had control of markets on Friday.  Bears stepped in and sold stock in volume on Jerome Powell inflation comments. Futures remain testy heading into Monday so we have to re-consider the outlook for the markets.  I had thought last week's mini-rally was coming a little early with a preferred move for 50-day MAs test as part of a move into Fibonacci retracements (for the move off June lows).  Friday's selling did bring markets into the upper levels of the Fibonacci retracement, and with weak Futures, we could see 50-day MA tests early next week. The Nasdaq was the weakest index heading into Friday and suffered the biggest percentage loss on the day. There was no surprise to see distribution control volume with ADX moving to a new 'sell' in line with 'sell' triggers in On-Balance-Volume and the MACD.  The index continues to underperform the S&P.  I would be looking for the Nasdaq to test its 50-day MA first, which would be an ideal