This bounce has gone through 50-day MAs and is now challenging 20-day MAs for the S&P, Nasdaq and Russell 2000.  Since the swing low was established last week indices have rallied without pause.  At this stage, we would want to see how markets react to when sellers return.  For the early part of the day it looked like we were going to get that mini-top reversal candlestick, but instead, all indices were able to close at highs.  Gains in the Nasdaq were enough to see a 'buy' trigger in the ADX, although there is still need for a few more days of gains before technicals turn net positive - something we may not see.  The index is also underperforming relative to the S&P, but is close to a signal crossover in this regard (towards outperformance). 

Bulls will be happy the bounce managed to add another day, but the buying volume remained disappointing. However, we did see easy breaks of 50-day MAs, which opens up moves to 200-day MAs and/or August highs.  Whether we ge there will largely be determined by buyers stepping in with volume, but we can let price action drive momentum for now. The S&P added to the bullish momentum with a new 'buy' trigger in the ADX, but other technicals remain bearish.  The index is just above holding on to its relative performance advantage against the Russell 2000 - but is on the verge of an underperformance switch to this index.  The other indicator to watch (which I don't mention much) is the Rate-of-Change (ROC).  If ROC can return above '0' it would mark a cyclical return for bulls. 

The last couple of days are a bit of a mixed bag.  We got the last-chance-saloon bounce that markets needed if not the enitre move from June lows was to retrace, but the volume for some of the indices wasn't exactly crying out in buyer demand.  Starting with the Nasdaq, there really was very little buying volume today as the index gained less than 1%. We have a 50-day MA overhead which didn't offer a whole lot of support when it was tested last week, but it may be more troublesome as resistance.

Friday's selling continued into Tuesday, with the Russell 2000 experiencing the worst of the losses.  Indices are fast running out of support with Fibonacci retracements under threat after today's losses; this has become most apparent in the Nasdaq but no index is safe.  The Russell 2000 is looking the most vulnerable as today's bearish candlestick has the look of a continuation move. The selling in the Russell 2000 has only just delivered a loss of stochastic midline support which adds to the pressure on bulls and means we are looking at a return to the bear market phase which has dominated throughout 2022. 

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.