Markets staged a recovery Friday after bears were unsuccessful in pushing follow-through selling after a break of intraday support in morning trading. However, markets are approaching a decision point where declining resistance on the daily converges with rising support.
The S&P offers the classic coiling play. Add to this the presence of the 20-day and 50-day MAs within the coil, with the 200-day MA just below, and it suggests the next break could set the tone into September. Technicals are mixed with momentum at bullish support, but 'sell' triggers in the MACD, On-Balance-Volume and +DI/-DI.
The NASDAQ is holding 5,038 support, which I hadn't thought would play as important support, but buyers look willing to defend. The next levels higher are 5,096 and 5,150. Given technicals are net negative, it will take a good push to get past the two aforementioned levels, but testing these looks a good challenge for the coming week.
The Percentage of NASDAQ Stocks Above 50-day MA bounced off the 30% level which has marked good support in the past; another tick in the bull column and an endorsement of 5,038 support.
The Semiconductor Index hasn't yet emerged from its bullish wedge, but a break higher would offer a nice move to test the 50-day MA. Friday's close (if offered at Monday's open) is a good place to start.
The Russell 2000 also looks well set for a rally. The last three candlesticks have been a bullish hammer, inside day, and bullish engulfing pattern; and all three from a point of oversold momentum, which increases their reversal potential. The 200-day MA is overhead, so any bounce will quickly have to navigate resistance, but there is a potential foothold for buyers to work.
For the coming week, bulls have an opportunity to open up the play. Whether they can keep the momentum for the rest of the week remains to be seen.