Not since the start of September have Bears been able to make an impression. For many indices, volume climbed to register a distribution day, adding to market troubles. There is no long term damage to markets as they remain within easy reach of all-time highs. Also, markets have reached oversold levels on intermediate and near term time frames, suggesting a bounce is likely soon. 

The S&P was able to claw back some of the losses from the intraday low, but it wasn’t enough to avert a net bearish finish for the day. Technicals remain firmly negative. The best thing about the index is the continued relative out-performance to its peers; when buyers reappear they are likely to buy into defensive Large Caps ahead of other indices. Watch for early strength – a two bar reversal would be an ideal play for Wednesday.

The Nasdaq experienced a similar day to the S&P, but it hasn’t yet undercut support of 5,097 September low. Today’s intraday low came close to testing this but bulls were able to recover. The presence of such support offers an opportunity for buyers to make a stand on Wednesday – a good premarket could set up a solid trade-worthy bounce.

The Russell 2000 failed in its chance to build a rally off 1,190, It’s now looking at a test of the 200-day MA. Best chance for bulls will be a 2-bar reversal which puts the index back at 1,190. While it lacks a natural support level, the Russell 2000 has experienced the worst of the selling. Should a bounce occur, the relative gain will likely be greatest here – note the extreme relative under-performance of this index to its peers.

For Wednesday, bulls/buyers will not want to see much follow through down premarket. If markets can linger near today’s closing prices then there is a chance some form of swing low could develop. Aggressive buyers may obtain the greatest reward from the Russell 2000, although the Nasdaq is the index trading nearest to logical support. Bears are probably too late to the game to be opening shorts, but any failure to follow through lower in early trading tomorrow should probably be viewed as a chance to lock in profits.