The breakout in the S&P came in with higher volume accumulation, which suggests something more than the short covering which typically drives the early move. Technicals are good, but relative strength is sharply in favour of the Russell 2000 (and Nasdaq).
The Russell 2000 experienced a disappointing late afternoon loss which will have bulls nevry on Monday. Having finally taken out the January 'bull trap' it's a risk of creating another. A close below 1,182 would be an aggressive short with a stop on a close above 1,194.
Nasdaq breadth supported the rally, with barely a dip on Friday's sell off. For example, the Nasdaq Summation Index hasn't reached an overbought state.
Even the hypersensitive Percentage of Nasdaq Stocks above the 50-day MA barely change on Friday's sell off.
Markets are probably set up for losses on Monday, but shorts wouldn't want to get too comfortable as there is plenty of support on offer.
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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