Don't let the action on Friday fool you. The bulls are still very much in control and if anything, the late recovery by the bulls on Friday was very impressive. The market had reached such overbought levels, that it was a given that they would fall sharply on any bad news. Actually let me correct that. The market had reached SUCH overbought levels that a pullback was on the cards even if we got any good news. The bad jobs number was just a convenient excuse for the market to fall. But like I said earlier, the late comeback by the bulls was impressive.
So much for last week. Looking at the week ahead, the markets are still at overbought levels, at least according to the McClellan Oscillator. If you are bullish, and there really is no reason to be in the bearish camp here, what you would ideally like to see here is a low volume pullback or a period of consolidation. The market has two ways to work off overbought conditions, like the one it currently finds itself in, (a) a sharp pullback (b) a period of consolidation. No prizes for guessing what the bulls would prefer! Another big move up right here and the market probably gets rejected at upcoming resistance levels.
And if you are short or are looking to go short, don't try calling the exact top unless you are a day trader. By that I mean, be cautious and don't take large positions all at once. Stick to smaller time frames as the bigger picture is very much in favor of the bulls.
Days like Friday are good in assessing which stocks held up well and are going to probably lead the market higher. I will be back with a watchlist of such stocks later in the day.
Take care and good luck!