The major indices spent Tuesday consolidating at the five-day highs which suggests that the market may be consolidating before making another move higher.

Momentum indicators continue to suggest an overbought state in the market. As such, Deron Wagner is inclined to wait for new setups to develop rather than chase the market or blindly jump into short positions.

The S&P 500 ($SPX.X) is at key resistance of the downtrend line and the 50-day MA. Over the next two trading sessions more short setups are likely to begin to develop.

Deron Wagner anticipates the S&P will rally into its 50-day MA, but he's not interested in taking on any more long positions as many of the short-term technical indicators are providing overbought readings.

In light of the recent selloff the market now has considerable overhead, and strong volume is generally needed to reclaim former support levels.

For a third consecutive day the broad market has whipsawed but remained in a distinct trading range. This range-bound reversal activity suggests indecision in the market.

If the broad market loses support of Thursday's reversal low, this could bring another wave of selling on Wall Street.

The fact that all five major indices formed distinct bullish reversal candles is significant enough to possibly neutralize any bearish effects of the distribution day on the DJIA and S&P 500.

Both the Nasdaq and S&P Futures are down 0.4%. When combined with yesterday's late session selloff, it is likely that the downward pressure on the market will likely continue.

A return to volume at above average levels on positive days in the market would provide further substantiation that the market may have found a bottom following the recent selling.