The iShares Russell 2000 Index ETF (IWM) is now at a critical crossroad, as it approaches resistance of both its 20-day EMA and the lows of its prior trading range.

Stocks recovered from Tuesday's distribution day, but trade was light.

There have now been four distribution days on the NYSE and three on the Nasdaq in the past 20 trading days. Deron Wagner will become concerned for the potential of a bigger market correction if either or both of these indices reaches more than 5 distribution days in a consecutive 20 trading day timeframe.

Is this pullback a buying opportunity?

Although price action has not been favorable lately, distribution days have been held in check.

Over the past two sessions, the iPath Dow Jones AIG Commodity ETN (DJP) has formed back-to-back reversal candles, as it has tested support of its 10-day and 20-day moving averages.

In the short run, it is probably best to remain mostly in cash until we get a better feel for how the market will react to yesterday's sell-off.

If the S&P MidCap 400 and small-cap Russell 2000 can break out of their respective trading ranges, then the market will likely see a more authoritative rally.

Deron Wagner will be watching the small-cap Russell 2000 carefully on Tuesday, as a breakout by this index could spark a broad market rally.

Although Deron Wagner remains bullish on the market, he is keenly aware that all of the major indices are at key resistance levels. Should another distribution day creep into the market early this week, he may consider reducing his long exposure.