Over the past couple of weeks we have been watching for the market to at least show some modest enthusiasm for a bounce since the indices have fallen into some fairly strong support on the monthly time frames. On Friday it finally took a chance, although the risks were low with market participants growing complacent on holiday leftovers.

After gapping modestly higher into Friday's open on the shortened trading session, the market stalled and pulled back. Volume did not increase at all on the selling, however, and this relieved the bulls who then began to cautiously position themselves for a Black Friday shopping spree. While many were out taking advantage of the early morning retail sales at their local department stores, those more inclined to look for a great deal in the market instead of at the market were beginning to gain encouragement.



At about 10:00 am ET the bulls began to really take over. The buying picked up at 10:15 ET and after that the corrections were on light volume and at a more modest downside pace than compared to the upside. This created a second buy setup on the 5-minute time frame in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) out of the 10:45 ET correction period and into the one at 11:00. It culminated in a strong breakout higher in those two indices.

The Nasdaq Composite ($COMPX) significantly lagged the other two indices throughout the morning, beginning with greater weakness out of the open. The 15-minute 20 simple moving average held the congestion, however, and it managed to round off at lows intraday so that it was also breaking higher when the Dow and S&Ps formed another bull flag on the 5-minute time frame heading into 11:30 ET. This late morning rally was the strongest one of the session up until that point. It took the S&Ps into Tuesday's highs and the Nasdaq past its morning highs, allowing it greater upside potential into the afternoon.



The rolls did change to some degree with the afternoon session. The Nasdaq gained a stronger lead and a strong final push higher took place shortly after noon. This moved the Nasdaq into its 15-minute 200 sma resistance, which held well at 12:30 ET, and it closed the S&P's gap from Tuesday's close into Wednesday's open. This resistance also corresponded to Wednesday's highs in the Dow Jones Ind. Ave., so it made it very difficult for the market to continue higher into the final half hour since all three of the major indices were running smack into strong resistance on the 15-minute time frame. The result was a very choppy end to the session. The market held the 5-minute 20 sma as support and the 15-minute resistance for the highs into the early close at 1:00 ET.

While volume was light throughout the session, the retailers performed well. The market was hopeful that Black Friday's holiday sales would provide a nice economic boost and many of the stocks which had been very beaten down in this sector had strong showings into the weekend. Circuit City (CC) was one of the strongest, rallying 19.5% for a gain of $1.06. Home Depot Inc. (HD) added 3.2%, or $0.90. J.C. Penney Co. (JCP) rose 3.1% (+$1.23), while Wal-Mart Stores (WMT) added 1.9% (+$0.87). I find it very difficult to become too excited about these gains given the larger picture though. Sure, many of these could use an upside correction on the monthly time frames at some point, but other than perhaps for daytrading, I'll be staying clear of them for the time being.



In the market as a whole, the Dow gained 181.84 points on Friday to end the session at 12,980.88. The S&P 500 rose 23.93 points (+1.7%) and closed at 1,440. The Nasdaq Composite climbed 34.45 points (+1.3%). It closed at 2,596. The market has a lot on its plate in terms of economic data in this coming week. Existing-home sales and durable-goods orders are just two to watch out for on Tuesday and then Wednesday, respectfully. There is a strong debate as to whether or not the Fed will again slash rates in its December meeting, but at this point I still consider it rather a moot point, since I am continuing to lean towards the likelihood of a larger market correction on the monthly time frame into the new year regardless of the Fed's decision. I will only be looking for the market to bounce on the daily and weekly time frames, so any buying I'll be doing over the next few weeks will be aimed at the short-term only.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.