The bulls closed the week by building on the oversold bounce we've been enjoying for three days, but it was only slightly higher than how the week opened. Volume was light due to the upcoming holiday weekend, but breadth was good and there were some pockets of momentum. It was standard holiday trading, with the bears standing aside while the more energetic bulls pushed things around.
It still looks like another oversold bounce to me, and with the positive aspects of the end of a month coming to a close, I am looking for the bears to make a better effort next week.
It's definitely possible that the market is going to pull off another recovery like it did in March and April, but you should note that those V-shaped bounces began in the middle of the month, after we had topped out in the first days of the new month.
Fundamentally, the news flow is difficult right now. The economic reports, such as housing starts today and numerous downside revisions of GDP by economists, have been mostly negative, and the European sovereign debt problem is still a muddle. Ironically, the poor economic news in the U.S. is pressuring the dollar, and that is helping the market, but you have to wonder if the euro has much of a basis to continue to outperform.
The biggest problem is slow action. We see weak oversold bounces in banks one day and retails the next, and that excites some folks but, overall, it's slow action and upside momentum has not been very dependable.
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