The market had a really nice run while I was away! That "bit of strength coming in" turned out to be a wee bit more than just a "bit"! The indices broke higher out of the daily range early on in the day on Thursday after a nice momentum gap. Higher-than-anticipated sales numbers from retailers such as Wal-mart (WMT) and Costco Wholesale (COST) helped quite a bit with the upside. Thursday's gap itself had brought the market into previous highs, so that created some congestion out of the open, but that range was soon breaking to new highs in the latter half of the morning. The trend then continued throughout the remainder of the session, gaining momentum in the final 90 minutes of trading. This momentum continued somewhat into Friday morning for the first 15-20 minutes of the day.



Things did slow down a bit on Friday though after the opening action. The market had become very extended after putting in the strongest upside move of the entire month. The indices fell into a range just as it had the previous morning as volume declined into the 5 minute 20 simple moving average. This range narrowed as it approached that support level and the volume in the market hit its lightest level of the morning just before the indices again broke higher. The S&P 500 and Dow Jones Industrial Average led the move and moved on to record levels, but the Nasdaq, which had formed a lower level congestion, had a difficult time with the initial morning highs and this resistance held all three of the major indices in and led to a second correction coming out of the 10:45 ET correction period.

Market volume declined a great deal over noon on Friday. The second pullback in the market was much more significant than the first, allowing the indices to pull back into the 15 minute 20 simple moving average. When the 12:00 ET correction period hit it held perfectly, pulling up into the 5 min 20 sma with a marked change into momentum, albeit on just a very small intraday time frame. This change in momentum was confirmed, however, by a choppy base for the next 45 minutes of the day, eventually breaking higher around 13:15 ET. Although this breakout lacked the strength of the move into Thursday afternoon, it was nevertheless a steady one, holding the 5 minute 20 sma well into the final half hour of trading. The Dow and S&Ps did break that support in the final minutes of trading, but the Nasdaq spent the afternoon attempting to make up for the ground it had lost earlier in the day and closed within a few ticks of the day's highs.



By the end of the session on Friday, the Dow Jones Industrial Average ($DJI) had made a new record closing high at 13,907.25 (+45.52 points). It ended the week up by 1.8% and is rapidly coming into the 14,000 price resistance level. The S&P 500 gained 1.3% last week, adding 4.80 points on Friday to close at 1,552. This also marked a record closing high. The Nasdaq Composite had the smallest percentage gain on Friday, but outpaced the S&Ps on the week with a gain of 1.4%. 5.27 points were added to the index on Friday and it closed at 2,707.

Financials such as Merrill Lynch & Co. (MER: +1.2%) and JP Morgan Chase and Co. (JPM: 1.0%) performed very well into the weekend despite a rather wicked start to the week. Nearly all of them jumped sharply on Thursday after turning around on Wednesday off lows and this momentum moved the sector higher into Friday as well.

There was a lot of talk hype week regarding the merger talks between Rio Tinto (RTP) and Alcan Inc. (AL), which it hoped to acquire. Alcoa Inc. (AA), which was viewed as a rival, announced on Thursday that it was withdrawing its bid and the stock rose 4.5% on Friday following the news.

Some other names which made substantial gains on Friday were AAPL, RIMM, PAYX, PDLI, GOOG, WFMI, and SIGM.

The market can still creep higher on Monday as some additional follow-through on these gains, but with momentum slowing and several days of upside already under its belt, it's going to be more difficult to sustain the buying and some rapid pullbacks are now a risk on the 5 and 15 minute time frames.



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.