The market experienced its strongest uptrend day in a number of months on Friday, climbing throughout the session in a narrow trend channel with the 5 minute 20 simple moving average serving as support throughout the session. The day began rather unexceptionally, but at 10:00 ET the July home sales data was released and the indices surged to new intraday highs thanks to an expected jump in sales last month. A number of housing-related stocks have been showing downside exhaustion the past couple of weeks and while things still don't look very peachy for the likes of Countrywide Financial (CFC) and a number of others, but I think that a lot of folks will be doing a bit of dumpster diving at these levels in over the next few weeks. Home price data on Tuesday with the Case-Shiller index and then on Friday from the Office of Federal Housing Enterprise Oversight will be watched by many closely monitoring this sector.



The market fell into a slow correction off highs soon after 10:00 ET, but the volume declined throughout the pullback and the pace of the move was very gradual into the 5 minute 20 sma. The range continued on light volume as a triangle formed and then shortly before 12:00 ET the indices again began to advance. At about 12:15 ET they popped sharply through the intraday highs and out of a small 1 minute base. The Nasdaq Composite and Dow Jones Industrial Average both retested Thursday's highs on this breakout and the S&P 500 came very close before the three again fell into a level of congestion along the highs of the day and again on light volume.



One of the most interesting things to me on Friday was that whilst the market again broke higher out of the 14:00 ET correction period, the overall volume throughout the session was lighter than it had been all week and even all month. This seems to indicate a bit of hesitancy and confirms the cautiousness of the optimism that has been attempting to build ever since the Fed's surprise rate cuts the week before. At least the lightest volume was during the correction moves on Friday and it would then increase a bit with each break to new highs. Since most of the day was spent in corrections with shorter, but stronger rallies, the lighter volume is not really that surprising. I think that if we had seen longer bases at highs with stronger breakout that the overall volume would likely have been higher. Instead the market resembled a staircase of worn out steps as the buyers continued to push again into the closing bell.



By the end of the session the Dow ($DJI) had risen 142.99 points (+1.1%) and closed at 13,378.87. 29 of its 30 stocks posted gains. Top advancers included Exxon Mobil Corp. (XOM) with a gain of 2.3%, Home Depot Inc. (HD) with gains of 1.9%, and Boeing Co. (BA), which climbed 1.8%.

The S&P 500 ($SPX) rose 16.87 points on Friday (+1.2%) and ended the day at 1,479. The Nasdaq Composite climbed 34.99 points (+1.4%). It closed at 2,576. Apple Inc. (AAPL) helped a great deal by gaining 3.2%.

Other top gainers were Mentor Graphics Corp. (MENT), Biogen Idec Inc. (BIIB), Blue Coat Systems Inc. (BCSI), National Oilwell Varco Inc. (NOV), Ann Taylor Stores Corp. (ANN) and Nucor Corp. (NUE). The financials remained among the weakest, pulling lower off 10 and 20 day simple moving average after taking back some of its sharp losses earlier in the week.

I again remain bullish this week, but expect a lot more choppy trading to continue with days like Friday remaining the exception. The indices are also still subject to the price resistance from a highs few weeks back, which is also the 50 day simple moving average level in the Dow and S&Ps. As the week progresses, keep in mind that next weekend is going to be a three-day weekend due to the Labor Day holiday, so expect volume to decline a great deal on Friday. This will be particularly true after the first hour of trading.

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.