Bears Reverse Early Gains

On my weekly post I had talked about the bearish position, which wasn't really apparent on the daily charts. Today was the first indication bears may be working on something more than what had looked to be a straightforward 'buy the dip' retracement.

The Dow was the first index to return to a net bearish technical picture on the daily time frame. Volume was lighter than recent days, which will offer some comfort to bulls, but it's the manner of the weak finish which is of greater concern.  The 200-day MA is looking like a key support level.

The Russell 2000 finished at the low of the day. Today's action followed yesterday's 'sell' trigger in the MACD. The close proximity of both 20-day and 50-day MAs should help bulls, but a move back to 1,085 can't be ruled out.

The Nasdaq is trading around its 200-day MA which is also close to the level which marked the breakout in May. As with other indices, volume was lighter, so there wasn't a tonne of conviction on the selling.

The early head-and-shoulder pattern in the S&P looks to have morphed into an expanding wedge.  Given the rate of recent losses, a confirmation test of wedge support (close to the 200-day MA) doesn't look unreasonable at this point.

For tomorrow, bulls can't afford to lose Tuesday's lows (by close of business) as next up are May lows. Bulls would probably be happier if there is a spike low, trapping shorts, before bringing markets back to open prices. Time will tell.