We went into Friday following a positive reversal day on Thursday in many indices, so the expected result was some follow-through upside action. It took a while, but by the close stocks did end the day higher. It wasn't a text book reversal day action since Friday may have also produced reversal days on a few charts.
The Dow ended the day up 44.50 points, and the leaders all outperformed the S&P and Dow, which may be a good sign.
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The small caps, Nasdaq, and Dow Transportation index, all had good days on Friday, and it will be a boost to the bulls if these indices can continue to outperform.
The SPY (S&P 500 / C-fund) made a second attempt to rebound off of the 50-day EMA. So far it has held, and each of the prior "kangaroo tail" reversals have produced a little more short-term upside action. The trouble has been holding above the 188 level. That's about where it closed on Friday so we have another test out of the gate this morning. There are some reasons to believe that this time will be successful, but again the Nasdaq and Small Caps need to help out.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 is trying to hold above the newly created short-term rising support line, but the bigger trend has been down and there is a rising wedge being created (red) that may cause some problems in the not so distant future. Getting above 89.0 will be a big deal.
Chart provided courtesy of of www.decisionpoint.com, analysis by TSP Talk
For a third straight day the small caps of the Russell 2000 closed below the 200-day EMA. It has some support near 1085 and the two reversal days on Thursday and Friday would theoretically bode well for the index early this week. The 3 to 5 day close rule below a major support level is in jeopardy and the bulls will need some help pushing this ETF back above that 200-day EMA before we get the 5th close.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index - the market leader - probably looks the best out of all of the major indices, and that is a great sign. It is at an important pivot point right now after falling below the rising neckline of its inverted head and shoulders pattern. Keep your eye on this 7850 level. I think it will be a big clue for the rest of the market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds dipped on Friday and the TLT is hitting the top of its rising trading channel. There are open gaps on both these charts and I would look for them to try to get filled in the coming days.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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