The poor volume performance suggests an absence of institutional involvement on the long side of the market. If the market cannot find sound footing over the next several sessions the odds will begin to favor another leg down.

Deron Wagner believes that the market will likely seek higher ground over the next few days.

The market continues to show signs of being oversold. A quick review of the Nasdaq Composite ($COMPX) suggests that caution is warranted on the short side of the market.

Deron Wagner is now actively looking for short setups.

The market recovered nicely on Tuesday, but without the confirmation of a follow-through, Deron Wagner considers Tuesday's price action as nothing more than a relief rally.

As long as the Nasdaq holds the 200-day MA and its two-year uptrend line, the past 9 days of carnage will only be considered a market correction. However, if the Nasdaq, DJIA and S&P 500 all lose support of their 200-day moving averages, the market will likely undergo a severe trend reversal.

On Friday the iShares MSCI Indonesia Investable Market ETF (EIDO) gapped down sharply, suggesting that EIDO may be falling victim to overall market weakness.

Despite the oversold condition in the market, Deron Wagner is not inclined to take long positions even if the market improves on yesterday's close.

Deron Wagner expects the market to see a relief rally sometime in the next two sessions and also anticipates sector rotation out of emerging market and Energy ETFs.

Given that the market has been under selling pressure for five consecutive sessions, Deron Wagner would not be surprised to see a relief rally on Wednesday.