Market Reversal Friday Shows That Buyers Are Still Engaged

Posted 9:00 AM ET - Last Friday the S&P 500 was down 11 points before the open. It looked like we were going to have a nasty day, but I encouraged you to remain calm. The market found support during the first hour of trading and we spent the rest of the day grinding higher. By the close, stocks finished in positive territory. This price action was bullish and it shows that buyers are still engaged. Bullish speculators were flushed out early in the day and buyers started to nibble. This rally still has room to go, but the gains will be hard-fought. We can expect a series of moves higher and price consolidation after each one. A temporary top will be marked by a big gap higher (15 S&P points) and an intraday reversal. This week we will get ISM manufacturing, ISM services and official PMI's. I'm expecting strong results and a bullish reaction. The jobs report for February will not be released until March 10th. The next Fed meeting is on March 15th and that could provide a headwind. We should still see bullish price action for the next two weeks. Swing traders need to respect the market stop at SPY $235 on a closing basis. Last Friday was a classic example of why I use the close as my guide. I don't want to be "ticked out" of my positions on an intraday head fake. Your call positions weathered a speedbump Friday and we should still have a market tailwind for 2 more weeks. Day traders need to be patient on the open. Friday we had a nice opportunity to scale into long positions after the first hour of trading. The S&P 500 is flat this morning and we need to wait for follow-through buying from last Friday's reversal. I believe stocks will have a little nervousness early in the day and the bid will strengthen after the first hour. We want to see lower opens and higher closes. That is a very bullish pattern and as long as it stays intact, we can trade from the long side with confidence. Watch for buying into the closing bell. I'm expecting a choppy market this week with an upward bias. . .

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