Monday's confluence of support tests was going to bring a reaction and a reaction indeed occurred. Wednesday marked the second day of buying, but volume for yesterday was down on Tuesday's volume and indices will soon find themselves testing the resolve of buyers of the July high—will supply / sellers return?
For the NASDAQ, yesterday's buying was sufficient to regain its 20-day MA with new 'buy' triggers for On-Balance-Volume and ADX.
The S&P also saw a fresh On-Balance-Volume 'buy' to go with the successful test of the 50-day MA and return close above its 20-day MA. Large Caps are outperforming Small Caps, although Small Caps are making up ground against them.
Speaking of Small Caps, the Russell 2000 (via (NYSE:IWM) bounced off channel support to again sit in the middle of its trading range. Buying volume was light and the first point of call will be flat-lined resistance of its 20-day and 50-day MAs. However, the trading range remains dominant—so support and resistance is all that matters.
For the remainder of the week we need to see how supply plays out for the NASDAQ and S&P as they approach previous highs. For the Russell 2000, we need to see whether support or resistance are tested again. The 200-day MA is also a potential factor for the latter index.