This bounce has gone through 50-day moving averages (MAs) and is now challenging 20-day MAs for the S&P 500, 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 yesterday 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).
The S&P closed with a new 'buy' trigger for On-Balance-Volume which was countered somewhat by a new underperformance relative to the Russell 2000.
The Russell 2000 had the most technical improvement. In addition to the close yesterday above the 20-day MA, there were new 'buy' triggers for stochastics, ADX and On-Balance-Volume. The index is also outperforming both the Nasdaq and the S&P.
For today, watch action in the Russell 2000, which is now the lead index and the one most likely to post the biggest gain if buyers can continue their run of good form. If sellers sniff an opportunity, then look to the Nasdaq to initiate the fall as it's the weakest index in relative terms.