Good day! The market closed a hair higher on Friday after a strong morning. The indices had gapped upwards into the open after the futures climbed throughout premarket trading. Following the bell, the indices began to retrace their gains, pulling in to close the gap area. The Nasdaq Composite ($COMPX) and S&P 500 ($SPX) found support at Thursday afternoon's highs, while the Dow Jones Industrial Average ($DJI) displayed a bit more weakness, closing the gap completely and returning to Thursday's close and the 5 minute 20 simple moving average. From that point the market then resumed its earlier ascent, moving higher throughout the first half of the morning.

The morning reversal periods had very little effect on the indices on Friday. Typically a morning move will stall or reverse at 10:15, 10:45 or between 11-11:15 ET. This time the market was about 10 minute behind schedule, hitting highs at 10:25 ET and then continuing to turn over and change momentum into 10:55 ET with a second pivot high. In the S&Ps and Dow these two highs created forms of double tops, while the slightly weaker Nasdaq retraces to a lesser degree and formed an Avalanche. By 11:00 ET the highs of the day were established.

A third move higher following the reversal took place beginning at about 11:30 ET. The momentum was very gradual, rising slowly higher on declining volume, thus indicating a lack of true commitment from the bulls. The downside momentum increased substantially when the small channel from 11:30-12:00 ET broke lower. This move ended up being the strongest of the session and it exhausted into 12:30 ET with an increase in volume as the indices fell into support on the 15 minute charts. The S&Ps returned to Thursday's closing prices, while the Nasdaq hit the previous day's lows and the Dow came into both price support from previous lows, as well as its 5 minute 200 simple moving average. It was a strong enough combination to establish the lows of the day and the market reacted quickly.







As the afternoon progressed, the market fell into a narrow trading range. The bias remained more bearish right up until the last 15 minutes of the day. The upside within the range was consistently more gradual than the downside moves and on lighter volume. Typically such a range will break in the direction of the previous one once it has corrected for 1.5 to 2 times the length of time in the previous decline, but the market held the third test of lows this time, leaving things with a slightly bullish bias into the close and hence into the next week. This leaves the market without any strong reversal potential just yet off the recent highs, even thought the further it moves, the more risky it becomes to take new positions in the direction of the trend.

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.