Stocks ended a turbulent week on a mixed note. As is typically the case, pre-holiday trade was light. The Nasdaq was last Thursday's only winner, as it closed higher by 0.4%. The S&P MidCap 400 declined 0.4%, while the small-cap Russell 2000 lost 0.3%. Both the DJIA and the S&P 500 edged lower by 0.1%.

Market internals also ended the day mixed. Volume dropped by 13.2% on the NYSE and 10.0% on the Nasdaq. Declining volume topped advancing volume by 2.1 to 1 while advancing volume edged declining volume on the Nasdaq by 1.1 to 1. Nothing of importance can be gleaned from the price to volume relationship of last Thursday.

A review of the major indices shows we are at critical support levels across the board. Specifically, the main stock market indexes are not only at key support of major moving averages, but also testing support of important uptrend lines. Both the S&P 500 and the Dow Jones Industrial Average are toying with support of their intermediate and long-term trendlines (On the charts below, the long-term trend is the bold black line. The intermediate-term trendline is dashed). If the market is to eventually head higher from here, it is likely that stocks will first "undercut" these key support levels before the next move up. Such "undercuts" of obvious support levels are often necessary in order to absorb overhead supply (price resistance) by shaking out the "weak hands." However, the possibility now exists that the major indices could alternatively set "lower lows," which could place the broad market in the midst of at least a near-term trend reversal. The annotated daily charts of the main stock market indexes below sum up the current technical situation in the broad market:











In addition to the major indices testing pivotal support levels, it's notable that leadership stocks have not shown much follow-through over the past several weeks, which is obviously cause for concern. As such, we are now exercising caution under current conditions, and are inclined to take a neutral stance with respect to the market (given that we are at the low end of the recent range). For the moment, we are hesitant to take on new positions unless the market can post an "accumulation day" (higher volume gains) and provide some follow-through.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.