Another week of market volatility with no ground gained. It's enough to give you indigestion. I made an assessment earlier this week in reference to the markets rally attempt stating:

“Any rally that occurs over the next few days from the current oversold condition should be used as a “sellable rally” to rebalance portfolios and related risk. (Chart updated through Thursday's close)

Click on picture to enlarge

• “While the market did rally over the last week as expected, it failed to rally above the current downtrend that has confined the market since mid-May.
• The failure of the market to rise back towards new-highs, given the “oversold” condition discussed last week, continues to confirm the underlying weakness in the market.
• While overhead resistance has kept the markets from rising in recent months,downside support at the 150 and 200-day moving averages has kept the “bullish trend” alive for now.
• Lastly, the oversold condition that existed last week has been primarily worked off. However, the market has not returned to an overbought condition that has previously marked the end of bull rallies. The market must close above 2180 by Friday's close to reverse the current weakness.

This short-term analysis suggests, especially when combined with the ongoing deterioration of internal measures, that rallies remain useful opportunities to re-balance portfolio risk as discussed last week.”

As suspected, the rally failed at the current downtrend resistance and is currently testing support at the 200-dma. Importantly, the market is NOT oversold currently which could potentially fuel further selling. 

I discussed yesteday's that more warning signs have emerged suggesting there may be more to the recent consolidation than just a pause. This weekend's reading list will delve into a variety of views on the current market action.