Looking at weekly charts, the Nasdaq had finished with a bearish "evening star" candlestick reversal pattern and this is typically followed with further selling. However, while I would be looking for further weakness, we may see on Wednesday or Thursday a spike low that will deliver the aggressive reversal day traders like.

Today's action in the Nasdaq could play as a "bear trap", *if* the index can stay above 17,900 for the next couple of days.

The Russell 2000 (IWM) was able to mount a bullish reversal, although I suspect we will see some form of zig_zag reversal as we enter the "zig" phase of the correction. Technicals are net bullish, although stochastics are weakening and today's buying volume was light.

The S&P played the bounce off breakout support, although the best of the action was available pre-market. Today's finish tagged trendline resistance following Friday's breakdown; if bears are in control then look for an open near today's close and then selling or flat action going forward.

The "dead cat" bounce is in effect with light volume buying to start the week. I would be looking for new swing lows by the end-of-week, and be surprised if Thursday's lows turned out to be the actual lows for the indices.

More By This Author: