Personally, I was very concerned and still am concerned about the late action on Friday. What I am finding funny is at around 3:40ish the Dow was up only about 75 points and falling and then REVERSED HARD.
Lets "pretend" that the Dow finished up only 10 points rather then up 147 points. We would ALL be saying Monday will be a BLOODBATH for the BEARS because we didn't close above the 50 day moving average.
Now EVERYONE is BULLISH and truly they may be right....who the knows anymore. However, if making money was this EASY we would all be BILLIONAIRES so I doubt it is a 90% or higher chance that we roll through 1650 and hit new highs early next week. If we GAP UP and reverse and close down on the day and Alcoa paints an "ugly picture" I guarantee everyone will be saying WE TEST 1600 on Tuesday....Yes, it can change that quickly !!!
Therefore, I believe this "battle" between the Bulls and Bears has not yet been SETTLED for the month of July.
We have positives (Technicals currently look great) and the economy might be recovering (of course if the employment report reported 155,000 jobs we would be thinking "who knows). However, interest rates might hit 3 percent next week and earnings might be weak (Portugal and Greece and Egypt are potential problems). Any of which could cause some issues. How about CHINA's growth.....we all forgot about that !!!!
Personally, I believe IBM will disappoint in a big way (they normally have lately). Accenture did and I feel it is a possible proxy. Intel and Apple might disappoint as well and Microsoft might not paint the "rosy picture" as well. Tech could lead us down this month (the QQQ has been up 8 straight days so who knows).
I expected a giant bullish hammer going into Friday and profited nicely off it, somehow luckily nailing the exact bottom at around 10:20am, selling for a profit, and then buying again around noon, selling those calls after triple along the way to my upper target of 163.3 (check my post).... now, Friday's print I don't think is technically a "hammer", but close enough.... they saved the final day's surge until the last few minutes because of options expiration and they wanted to shake-out some of the call holders, IMO.
WS sometimes is very predictable (often not)... we stopped right on the upper declining trendline going back to the May 22nd high. I think Monday is a wash day and expect the high to be lower than Friday's. Tuesday is the important day. Whether we breakout of this wedge and push towards that May 22nd high will depend on corporate earnings--the Fed will likely keep quiet until the economy improves a little more, and the market has shown it can shrug off higher bond yields and oil prices--at least in the short-term.
The market will make its decision soon, but I think it favors a decline back to the 200-day which is aligned on a collision course with the bottom trend-line of this huge wedge for July 12th-15th.... many big names will be reporting right around that time.
Nothing magical happens to the overall mood when you hit support or resistance, you just get that expected support or resistance. If something magical happened to the overall mood, buying with leverage to push through to higher levels would always make sense. It doesn't. Buying high doesn't make sense. Much if not all of Friday's action was caused by low natural buying/selling interest do to Friday being a zombie day and index ETF weekly options expiring. Notice how we stayed below the 50(162.75) at around the 162.50 options strike before suddenly blowing through to a close of almost exactly 163 even. It's the same way we stayed below 162 for hours and suddenly leaped above to stay in a matter of seconds.
I agree though. There will be resistance still above what will be the 50 day come Monday(162.87). The Friday close may simply be seen as part of AH that gets ignored on a regular basis and treated as late squaring up. You know, like those outside island trades you see sometimes.
Truly, I just find it funny HOW ALMOST EVERYONE (even the bears) now think we are DEFINITELY going higher....come on, we all ,know that is the best contrary indicator and the "talking heads" can turn this thing is a NY MINUTE....all of a sudden a 2.75% bond rate is not good....fed has lost control of rates they will say.....or China is slowing too much.....etc. etc.
Truly, I would not rule out "recession talk" as the 2nd quarter GDP might only come in at 1 percent....truly, this is too funny how everyone has this market going right through new highs this month and "to the moon"....come on, the most bullish calls are calling for an S and P of 1,750 by YEAR END so if we hit 1,650 on July 8 which might happen and we have run from 1,560 to 1,650 in like 2 weeks who says we can't at least re-test the lows or 1,600 later this week or next week.....I personally feel just like the BEARS feel they are done it would be TOO FUNNY if we break 1,600 next week and all of a sudden the BULLS will feel they are done.....I have seen it to many times.
Technical analysis is a "decent indicator" but truly world events can change the TECHNICALS quickly. If IBM reported on early Monday and said "THINGS ARE AWFUL" we would probably break right back below the 1,626 as "earnings worries" and "high rates" would TRUMP the technicals in my opinion. I still feel GDP will be awful for the 2nd quarter and all of a sudden the GDP projections for this year will come down......and you get a "short term correction possibly".....so who knows.
Bottomline, the risk/reward at around 1,650 I feel go back to the BEARS if you have at least a 2 week holding period......the first 100 +++ downward move will get the BEARS talking and my feeling is you will have one by Wednesday of this week (yes, one night this week Europe and Asia will sell off or rates or Oil spike up and "fears creep in").
Just my opinion....I see a Gap up Monday and who knows after that .... it might reverse or run !!!