The pullback in both the S&P 500 and NDX held at their respective 50-day averages and triggered ellipse buy signals. Both indices are now above recent MOB bands where the declines started from, and this is bullish.

The pullback on Thursday undercut both the 200-day avg. and the MOB band as shown on the chart below. On Friday, the index recovered both indicators, and we have follow-through tonight.

Both the S&P 500 and NDX are into an area of resistance accompanied by momentum divergence. This continues to be a place to not get aggressive on the long side.

Amazingly, the S&P 500, NDX, Russell 2000 Mid-Cap (MDY), and the Dow Transports are all into resistance zones with momentum divergence in most cases. This is an important area to look for either a change in trend or a push higher for continued strength.

We put on a short in both the S&P 500 and NDX last week as both reversed at MOB target bands and broke below their short-term uptrends.

A number of indices had a good 4% to 6% rally off the MOB and Ellipse support areas outlined last week.

The S&P 500 has pulled back to a support area identified by an ellipse turning point indicator and the 50-day average. This is an area to expect a short-term rally.

The S&P 500 reversed quickly last week from its short-term pullback. Upside momentum remains favorable.

The S&P 500 has been hovering around the MFU-3 target area of 4225 since late April and just recently successfully tested its 50-day average and triggered an ellipse buy. A weekly close above the most recent high would be positive and will likely lead to the next leg higher. On page 3, we show the weekly chart of the S&P, which remains well contained within its regression trend channel.

We believe this is a good risk/reward spot to take a shot at shorting the Q's.

Reviewing the components of the XHB and building related names, we see this area under distribution. We have been short LEN, MTH, and KBH and now adding the basket trade with the XHB. The initial target is $70.

The reversals we talked about in our last report on May 25 now have a few indices, such as the NDX and Russell 2000 breaking out above important resistance zones.

Most of what we talked about last week remains the same. Here we wanted to highlight a possible positive shift taking place in the Russell 2000. We will have more to say once the upside level gets triggered from the chart view below.

We have had a cautious view on the NDX and QQQ, and today's price action solidifies that view. The NDX had a feeble rally into its 50-day average and closed on its low. A close below the MFU-2 level which is where the index rallied from, will open the downside to the 12597 area, which is close to the rising 200-day average.

The S&P 500, Russell 2000, and the Mid-Cap (MDY) pullback to our target zones highlighted in recent reports. This may be all we get for a pause/pullback phase.