The DJIA gained 44.50 points to close at 16491.31 while the S&P 500 gained 7 to close at 1877.86. Even the Nasdaq rose 21.29 at the close to finish at 4090.59. The Russell 2000, the big loser this year so far, finished up 6.92 at 1102.91.
So, are the indexes back and ready for more upside gains next week? Not so fast. Friday saw nothing more than a short-term oversold bounce. The trading volume on Friday was not bad but substantially less than Thursday's down volume.
Most of the Friday's gains were most noticeable in the momentum technology stocks. That is the sector where the short hedge funds have been hiding out and covering their short positions. Keep in mind that the majority of those momentum stocks are in Trend Bearish territory.
Trading next week should be interesting. Of the four major indexes, not one has an oversold condition. If the momentum chasers had not turned this market green on Friday, Monday could have shown an oversold signal with a lower open. However, that is not the case so I am cautious and looking for more downside early next week to give that oversold signal that I am looking for.
Another sector that has entered into Trend Bearish territory is the SPDRs Select Sector Financial ETF (XLF). This is not surprising because of my "Growth Slowing" view of the economy. As a matter of fact, with the 10-year bond yield bearish (and now being confirmed by the XLF) along with inflation accelerating, it is easy to see why we are in a Growth Slowing economy.
So, stay cautious and focus on these macro indicators to understand where this market is and where it may be headed. The Russell 2000 is down almost 10% from its March highs. The Nasdaq is down 6% from its March high. Pay attention and forget about the old Wall Street pundits. The game has changed. The old indicators are not as useful any longer.
On Friday I covered my Yandex (YNDX) short on red in early trading for a nice gain and also sold my Exco Resources (XCO) long position for a nice gain. I started a new long position in a small-cap stock Female Health Company (FHCO). This was flagged with an extraordinarily oversold signal. All of my stock trades are timestamped at www.strategicstocktrades.com. A 93.71% success rate.
At the time of publication, the author was long FHCO.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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