Monday saw tech indices start to challenge the swing lows of the November and early December lows. How these indices react will determine how other lead indices will follow.
First up is the Nasdaq; Monday's high tagged this resistance (former support) level. Aggressive shorts will have attacked this area but will be forced to cover if there is a close above 6,855; technicals are mixed, but relative performance (vs the Russell 2000) suggests shorts may still be on the wrong end of the trade.
The Nasdaq 100 is in a similar predicament as the Nasdaq but managed to push into the November swing low; Tech indices are outperforming large caps, but underperforming against small caps; so occupying the middle ground may be to the benefit to shorts.
The S&P 500 didn't quite manage to challenge October-December congestion but will likely get there by week's end. As the weakest index it's the most vulnerable to further downside (and the best shorting opportunity).
The Russell 2000 remains the best long-side opportunity of the indices as relative performance kicks on but has a solid 50 points worth of gains (3%) to offer up before getting there. Value players should be happy.
For Tuesday, watch the tech indices and how they react as this key supply zone will determine the likely action for the S&P and Russell 2000, which are following behind. The Russell 2000 still has room for profits and this weakness can be bought while it continues to (relatively) outperform the Nasdaq and S&P.