As expected, volume came in extremely light on Friday due to the extended Holiday weekend and downward pressure picked up late in the day.

The SP500 sold off another 4.74 points while the DOW dipped 46 and the QQQQ about 1/4% for the day.

Despite the pullbacks, in looking at our PCI chart, you can see that there was underlying strength as evidenced by the "Sea of Green" in the daily accumulation/distribution column and buyers were coming in and purchasing at the ask price indicating they were willing to "pay up" in order to acquire stocks.

What is even more indicative is that virtually all of the major sectors now are showing bottoming technicals as they moved in unison to oversold levels.

Here ia a chart of the SP500 with traditional overbought/oversold indicators:



Notice that virtually all have apparently bottomed with the action of the last week and despite the continued selling on Friday have now turned up. I never like to look at a single indicator to call market turns and I have a general disdain for technical indicators that use moving averages (read...all of them). At times like these it is hard to ignore the preponderance of evidence.

As further evidence look at the Friday action on the VIX. With a continuation of the selloff, the index actually reversed on the day.
Technically the SP500 could correct to the 975 area, but for me that would be a time to take profits on the current hedges and prepare for a recovery rally going into earnings season. We still have another week and a half before earnings begin in earnest, so there is plenty of time a capitulation on the part of the bears.

So, whether it happens tomorrow or next week, the stage is set for a recovery. Earnings should once again be strong and ultimately that is the engine for higher prices.

First resistance for SP500 comes in at 1051, then 1077,1100 and 1105,
Supports remain 1000,993 and 975. There is no support below those levels till we get to 946, then 879.

This week has a limited calendar due to the shortened holiday trading schedule: