Okay, bulls couldn't hold all of their gains by the close of business, but their attempts at breaking the consolidation still have merit. None of this changes the overbought condition of breadth metrics, but it suggests a mini-rally could emerge before breadth is again in heavily overbought territory.
The S&P managed to edge a break of declining resistance on confirmed accumulation. Bearish technicals remained bearish, but the net technical picture is still bullish.
While Thursday's rally favoured bulls, with buyers jumping in at channel support for the S&P and 50-day MA for S&P and Dow, Friday took some of this gloss off - but didn't reverse all of the gains. However, market breadth remained in the bearish camp, with breadth metrics either overbought (Bullish Percents) or declining (Summation Index).
Sellers kept the pressure on, but volume was lighter than yesterday. The S&P finished at channel support and will find itself under pressure tomorrow. Technical weakness expanded with a 'sell' trigger between +DI and -DI.
Yesterday's highs remain the risk metric for new short positions. Bulls were unable to maintain their late morning advance after opening gaps down across the indices. Until such highs are broken, the near term short position remains favoured.
The S&P saw increased volume in confirmed distribution. It was accompanied with a 'sell' trigger in On-Balance-Volume. In the near term, there is an upcoming convergence between declining resistance and rising support of the channel. Channel support is also aided by the 50-day MA. Support should be stronger, but take nothing for granted!
The S&P lived up to its potential with a defensive rally off the 50-day MA / channel support (take your pick). Next test is channel resistance at the 20-day MA. Technicals likely to turn net bearish tomorrow despite bullish recovery.
Just a quick update as I didn't do a post after the market close yesterday. Selling continued to drive markets lower, confirming a large negative divergence in Nasdaq breadth (Percentage of Nasdaq Stocks above 50-day MA) with increasing technical weakness.