Markets are still working through their declines as they seek a point of seller's exhaustion. The Russell 2000 (via iShares Russell 2000 ETF (NYSE:IWM)), as the index of speculative stocks, is the one to watch for leads.
Yesterday's 6%+ loss undercut the prior low and left the index grasping for a low. On the plus side, selling volume was lighter than Tuesday's buying volume and the Small Cap index is now 19% away from its 200-day MA; if it gets to 21%—which could happen later today—it would leave it in the 1% zone of historic weak action and should be considered an incredible buying opportunity for investors with a multi-year time frame; even now, it has already surpassed the 5% zone, and investors should be active accumulating Small Cap stocks. Short term traders may also reap benefits if they have the stomach for the volatility.
With the level of damage recorded in the Russell 2000, it's looking unlikely that the S&P will be able to hold the 2,750 area it's attempting to consolidate around. While it does have the benefit in relative performance (vs the NASDAQ and Russell 2000), it doesn't have the candlestick patterns to suggest there is underlying demand to stall the decline. However, as with the Russell 2000, yesterday's selling volume was less than Tuesday's buying volume.
The NASDAQ is defending a little higher up the line than the S&P so is not looking as vulnerable as other indices. Again, selling volume was below Tuesday's buying volume. Bullish traders will want to see a recovery of the 200-day MA before entering a short term trade. It's not quite in investor territory yet.
With markets trading at deep discount, the strategy is not to pour all of your money into stocks in one day, but to look to spread buying out over the course of the next 3-6 months to ensure the swing low is caught. The Russell 2000 offers the best discount, closely followed by the S&P. Only the NASDAQ is looking a little on the rich side relative to its peers.