The market lacked a strong trend bias on Friday. After several days of strong upside, the indices had hit decent resistance at afternoon highs on Thursday, particularly in the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI). As I stated over past several days, the Nasdaq Composite ($COMPX) has had more room to push higher and we saw that occur from the start of trading on Friday. It was the only one of the four major indices to break Thursday's highs. The Russell 2000 had a very gradual upside intraday on Friday, but it had fallen further on Thursday afternoon and was not able to push through those highs.

As I mentioned in Friday's column, I was looking for a larger correction off Thursday's highs heading into the weekend. Initially I was expecting this to come more in the form of price correction, but instead the indices fell into a congestive type of correction. Both the S&P 500 and Dow merely chopped sideways throughout the entire day. Meanwhile, the Nasdaq crept higher along the 15 minute 20 period simple moving average.

The indices turned over a final time into the last hour of the day, moving off the upper end of the day's channel and back into the lower end of it. The flush was the steepest action of the day, particularly the final move of the last 5 minutes into the close. This was perhaps a bit of a response created by profit-taking following the week's gains and concern from the mediocre performance throughout Friday's session which would have created some hesitation from bulls into the weekend.

Dow Jones Industrial Average ($DJI)


A number of individual stocks stood out on Friday, making the day easier for equity traders than those looking for anything more than a scalp in the indices. The energy sector led gainers, up 1.5% on average on the day. Information technology rose an average of 1%. Petrohawk Energy Corp. was up 13.22% on Friday, leading gainers on the NYSE. Patriot Coal Corp. (PCX) rose 8.85%. Arch Coal Inc. (ACI) was another that trended higher throughout the day, gaining 5.34%. Forest Oil Corp. (FST) had a strong intraday trend and rose 4.56%. Other top gainers were PVA (+18.91%), GSP (+15.48%), HXL (+12.26%), and CRK (+11.06%).

On the Nasdaq the major gainers for the day were Marvell Technology Group (MRVL) (+29.3%), Wind River Systems (WIND), Energy Conversion Devices (ENER), and Infosys Technologies (INFY) (+8.27%). MRVL's 6-month highs were thanks to a better-than-expected earnings report late Thursday brought about in large part by sales of Wi-Fi and 3G chips. WIND's upside was also due to strong earnings. ENER's upside was fueled by strength among solar companies, particularly those with exposure to the German market, which is the larger market for this type of power. INFY rose on heavy volume after it raised its price target by 27%.

S&P 500 ($SPX)



As is obvious by the overall market performance, however, not as many stocks were as lucky as those listed above. J Crew Group (JCG) was a notable loser, falling 20.55% on Friday after it cut its outlook for the remainder of the year. It gapped sharply lower, but then ended up stuck in a range for the rest of the day due to that extreme open. Those that established strong losses with the advantage to traders of also having strong intraday trends included Ashland Inc. (ASH) (-7.91%), Weyerhaeuser Co. (WY) (-7.58%), and New Oriental Ed & Tech Group (EDU) (-5.48%) on the NYSE. Medical Action Inds. Inc. (MDCI) led the losers on the Nasdaq after they announced Q4 and fiscal year-end earnings that were 12.5% lower than a year earlier. It fell 21.65% by the close. Sigma Designs (SIGM) was another huge loser, falling 15.56% after its fiscal first quarter profit fell 13% and failed to meet estimates. Both of these traded in a range throughout most of the session after the opening gaps.

Nasdaq Composite ($COMPX)


Volume was light on Friday amid the congestion. The Dow Jones Industrial Average fell 7.9 points on Friday to close at 12,638.32. This amounted to a gain of 1.2% on the week, but it was still a 1.4% loss on the month. The S&P 500 rose 2.12 points and closed at 1,400.38 for a weekly loss of 1.8%, but a monthly gain of 1.1%. The Nasdaq Composite gained 14.34 points and closed at 2,522.66 on Friday. This gave it a 3.2% increase on the week and 4.6% on the month.

The month was saved after falling off highs two weeks earlier due in part to the upside exhaustion of oil prices when crude hit the $135 a barrel zone. Over the past week it has been pulling back while the market rallied. Oil futures ended the session on Friday at $127.35 a barrel. This was 3.7% lower on the week, but still a 12% gain for the month.

On the data front on Friday, the Commerce Department announced personal incomes and consumer spending and consumer prices for April. All of these rose 0.2%. This suggests that the economy weakened further during the quarter despite the much-hyped tax rebates since real disposable income and consumer spending came in flat after inflation was factored in.

At 10:00 ET the University of Michigan/Reuters consumer sentiment index reading came out showing a drop to 28-year lows. The index fell from 62.6 in April to 59.8 in May, which is the lowest level since June 1980. The consumer expectation index dropped from 53.3 in April to 51.1 in May. This is the lowest it has been since October 1990.

The indices are continuing to favor greater corrective action off highs on the 60-minute time frame into early next week. The Russell 200 is attempting to form an Avalanche on that time frame with the 740 zone as support in the EMini futures. I do expect that on a daily time frame, however, that we can still see the market fall into a longer upside or range-bound correction off the support from last week. This can mean slower upside overall which still allows sharp downside into a lower channel support. If this plays out for a few more weeks then the daily and weekly charts will have strong continuation short patterns in play that can lead to another very steep decline into the end of June.

If the indices try to break lower right away early this next week with a lower low on the S&Ps or Dow then we will be dealing with higher chance the market to bounce again on a larger time frame with more of a 2B type of action (a form of double bottom with a slightly lower second low that creates a trap for the bears). This would be particularly true if it is a slower decline than the ones two weeks ago. Or it could kick off a smaller downtrend, such as the one from 10:30 am to 11:10 am Friday morning on a 5 minute time frame in the ES and YM where the market would be heading into the second wave down.

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.