Well dear readers, the market is at crossroads here - interesting times indeed! The bulls were indeed impressive during the close on Friday and should carry this momentum with them on Monday. However, as pointed in the chart below, they face heavy resistance at 1100 and 1107 (MA 200) levels. These are important resistance levels and I expect the MA(200) to be especially hard to cross.
Also, the McClellan is slowly creeping up to overbought levels and another up day tomorrow would most probably take it to overbought territory, which is marked below.
So, what's the correct play here?
(1) In my opinion, selling into strength is the right strategy here, especially in light of the approaching MA(200) and McClellan Oscillator levels.
(2) If the market does indeed cross MA(200) with volume, then there will be plenty opportunities to go long again. Remember, the volume was pathetic on both Thursday and Friday. And if the market fails yet again at MA(200), get ready to short. Manage the risk and rewards will take care of themselves.
If you are bullish here, what you would like to see is consolidation at these levels just below MA(200). Better to wait, regather, get some volume and go for the kill rather than make a weak attempt at MA(200) with low volume which would be bound to fail. One sector that did move up on Friday with volume was the airline sector. I see some nice plays there with a bullish volume pattern. Check them out!
Take care and good luck!