The unemployment rate's move to multi-year highs didn't seem to be too much of a worry for the market, as the S&P 500 closed up 3.2% - at 1069.30 - for the week. And, the odds now slightly favor the bulls as we head into next week… with a footnote.
The S&P 500's got a couple of things working in its near-term favor.
The first one is the CBOE Volatility Index (VIX). It's falling, but it's still got plenty of room to move lower before a likely floor at the lower Bollinger band (20 day, 2 SDs) steps in around 18.40. You'll also see the VIX peaked and reversed at what's become a pretty significant resistance line of its own. We'll probably be looking at that resistance level again in the future.
The second bullish case for the market stems from the fact the S&P 500 (and the other indices too) have made their way back above the 50 day moving average (purple in the following chart). If this instance is anything like the July instance, then the proverbial ‘reset' effect of the small dip could be enough fuel to carry us through the end-of-year rally. We don't think a repeat is likely, but the market seems intent on testing the premise. SPX Daily Chart
For now then, the outlook is only a mildly bullish one, rooted more in the idea that the bears simply aren't putting up a fight…. a thought to keep in the back of your head for a second.
As for the other indices, the Dow ended the week higher by 293 points (+3.0%) at 10,006, while the NASDAQ gained 67.33 points (+3.3%) to end the week at 2112.44. Both charts mirror the S&P 500's, but the addition of a stochastic indicator to the NASDAQ's chart verifies where the strength is coming from… we're oversold.
Nasdaq Composite Daily Chart
The Dow's chart drives two other key points home. The first one is the role that the 10,000 level (horizontal line, in red on the following chart) is playing. It's probably 100% psychological, but it's still a factor to contend with.
The second point is a recent development…. a rising support line (also in red) that traces the four major lows we've seen since August has formed a wedge shape. This triangle pattern may end up providing the squeeze the bulls need to remain alive; at the very least it will act as a signal for an impending pullback.
