After yesterday’s finish it looked easier for markets to continue lower, and early action had suggested this might have been the case. A weak finish put a bit of a damper on things, but there is something for bulls to work with. Volume didn’t register as accumulation, which was disappointing and would have helped defining a capitulation – which doesn’t look to have happened yet.

The Nasdaq had the best of the action. A bullish harami after new lows offers a suggestion for higher prices tomorrow. The problems for bulls will start if the index makes it to Oct-Dec congestion zone and/or overhead moving averages.

The S&P recovered a good chunk of yesterday’s losses and has so far held on to the August/September swing lows. Oddly, technicals didn’t really improve in the face of today’s advance.

The Russell 2000 may have closed with a ‘bear trap’, but it requires confirmation as the move is still vulnerable to reversal. This index is the most oversold and the weakest of the lead indices. How it performs will be key for the health of the broader market. 

With 2015 firmly in the rear view mirror, overall action for last year has the look of professional distribution. So how markers react when/if they get back to testing highs will be key. For the Russell 2000, it will simply be a question of getting above 1,078.

But baby steps first, markets need to string a couple of higher closes which don’t get swamped by one big red bar. There is the advantage of heavily oversold conditions – last seen in 2011, and 2008 before that.