The broad market followed-up Tuesday's break of support in the S&P 500 with a modest bounce yesterday, but the recovery attempt lacked power. The Dow Jones Industrial Average advanced 0.4% and the Nasdaq Composite closed 0.2% higher, but the S&P 500 only managed a 0.1% gain. The small-cap Russell 2000 rallied 0.8%, while the S&P Midcap 400 gained 0.3%. All of the major indices' gains were the result of minor strength on the open, after which stocks traded in a very narrow, sideways range throughout the entire day.

Although the market temporarily put the brakes on Tuesday's slide, much lower volume levels showed that yesterday's rally lacked institutional buying interest. Total volume in the NYSE declined by 15%, while volume in the Nasdaq was 27% lower than the previous day's level. Considering that volume surged in the prior day's selloff, it would have been positive if turnover increased even more to match yesterday's gains, but that wasn't to be. Part of the reason for the lackluster trading activity could have been tied to the Jewish holiday of Passover, which began last evening. With the markets closed for the Good Friday holiday tomorrow, it's possible that stocks will remain in a holding pattern until next week. Wall Street often cuts out early ahead of three-day holiday weekends.

Overall, yesterday's minimal gains did little to change the current technical picture of the broad market. Given that the Nasdaq Composite lost 2.2% in three straight down days from April 7 through 11, it was not surprising to see a small upside correction yesterday. Even the Russell's 0.8% gain was no surprising considering that the index had dropped 3.1% over the course of the three prior days. If anything, we view yesterday's bounce as a chance to non-aggressively sell short the broad-based ETFs if you missed the first drop. If the April 11 lows are subsequently broken, we would feel more comfortable about adding to any short positions.

As for stops on any broad-based short positions, consider using Fibonacci retracement levels because the downtrends since the April 7 highs have been pretty smooth. As of now, each of the major indices remain well below even the first major Fibonacci retracement level of 38.2%, which would indicate the short-term downtrend is presently in no danger of reversing. Using Fibonacci, you could place your stops just above the 61.8% retracement levels, as a rally above that level often completely reverses a downtrend. With SPY (S&P 500 SPDR), for example, you can see that it remains well below its 61.8% retracement of the downtrend:

Because we expect another session of light turnover today, we'll wait until the beginning of next week to take an updated look at the daily charts of the major indices. Based on the current situation, our near-term bias remains cautiously bearish due to the S&P's failed breakout from a four-week consolidation and a drop below its six-month uptrend line. But the big question is whether or not the S&P 500, and a handful of other indices, will hold at support of its 50-day moving average this time around.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and Morpheus Trading Group, a trader education firm launched in 2001 that provides daily technical analysis of the leading ETFs and stocks.  For a free trial to the full version of The Wagner Daily or to learn about Wagner's other services, visit MorpheusTrading.com or send an e-mail to deron@morpheustrading.com.