We've had a bounce - now what?

Stocks rallied on Friday, although some big early gains were given back as the day wore on - turning into modest gains.  The Dow added 50-points on the day.

                                  

The S&P 500 broke above the new descending resistance line and many times old resistance, once broken, will act as support.  The mediocre close on Friday showed signs of a possible negative reversal day so we may see a test of that support this early this week.  Also note that the support line is declining.

                        

The key will be the 20 and 50-day EMA's.  The S&P 500 took back the 20 and 50 last week and normally this is a good intermediate term signal so if we start trading below them again for whatever reason, I think we might need to seek safely. But as a market timer I would also be on the lookout for a choppy trading range where the rules are a little different than in a trending market, which we've had for a couple of years.

The Dow Transportation Index continues to impress and being a market leader, it gives me a reason to be optimistic for the S&P 500 and the rest of the broader market.

We saw the "fake-out" / breakout of the triangle formation over the last two weeks.  That was followed by a pullback test of the breakout area (resistance once broken, acting as support) and on Friday we saw a push above that 3-day flat top.  Not too bad at all.
 

                       
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I've looked at several indicators, some of which I brought up last week, but few are giving us anything to go on.  Right now the indices are doing a pretty good job of telling the story themselves.  We have some support and resistance and we'll have to see if investors and traders are willing to buy the dips again, or if they are more interested in selling rallies.  We've had 6 positive days out of the last 7, so if the bears are going to make a move, it may be this week.  Otherwise the bulls are liable to take complete control again.

The TSP Talk Sentiment Survey saw a bulls (52%) to bears (32%) ratio of 1.53 to 1, which is neutral so the system in a 100% S-fund allocation for this week.