Good Morning, Traders. In yesterday's commentary, we discussed the odds of a small bounce in the markets and possible retracement of some of the recent losses. We guess that the key word should have been "small" at least so far. All three major averages moved up over Monday's highs yesterday, but only by a hair before selling off to close negative below Monday's closes on all three. Dow -8.56, S&P -2.41, and Nasdaq -9.39. Tuesday's lows were above Monday's lows, which means that the reversal could still be underway but we think no trader would disagree that we were expecting just a bit more. Let's see what happens going forward. The chart below of the S&P intraday details yesterday's action showing where the intraday uptrend of the last two days currently resides and what level needs to hold if we are indeed going to retrace a bit to the upside. Everything we are discussing here is annotated in the chart below, including the short-term uptrend from Monday to Tuesday. Basically, things look shaky for the bulls so far. One of the best tools for judging the strength of a market is to simply sit back and watch it closely on days after big moves occur. Do we get quick reversals to the upside indicating that the selling was overdone, or does the market feel "heavy" and have trouble moving back up through all the overhead supply? Still too early to put the kibosh on the reversal, but again bulls would have liked to see slightly more lift in the markets yesterday than the relatively flat day we got. Overall bias remains cautiously up in the S&P and Dow and sideways to down in the Nasdaq.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.