During last Friday's trade the market knocked Wall Street for a loop. Just on the previous Thursday the Street had a pretty good rally going as market participants shook off fears that the U.K. would vote to leave the E.U. and that sparked a 230 point gain on the DOW.
But by the close Friday, the roof had caved in when the Brexit news broke and markets all over the globe took a steep nosedive when investors dumped stocks and sought safety in gold and U.S. Treasuries.
It wasn't supposed to have happened that way and as last Thursday's strong rally suggested, investors were betting on the "stay" and not on a 600 point nosedive on the DOW.
OK, so it wasn't a crash, but within a few hours the market gave back gains that took months to accumulate. Now a good number of market strategists figure that the post-Brexit referendum era could have a bearish effect on the market and lead to declines in asset values for some time to come.
If that holds true, then beware of ''dead-cats bouncing" when the reflex rallies kick in next week. So while this is not the right time to sell, it is not the right time to buy either. Yet, there are plenty of investors who heeded the warning signals by the charts and are now in discretionary cash to take advantage of this sharp selloff by the markets.
But when you check this weekly [SPX] chart you'll note that this benchmark index doesn't look all that bearish. Sure, the MACD momentum bars and the RSI strength indicator have slipped right to the respective demarcation lines which means that the market has turned totally neutral. It also means that the market is set to either turn bullish or bearish in a flash.
Meanwhile, for the first time since last September the Moving-Average lines condiguration has turned bullish with the red line crossing above the green line. This indicates that in the long-run [whatever that means] the market's bias remains skewed to the upside.
The equal weight large-caps [RSP] sure got hit hard during last Friday's selling-squall and this benchmark took a steep nosedive in response. That the RSI strength indicator along with the MACD momentum bars crossed into their respective bearish territories, sure doesn't look good for the bulls in this game.
But check the MA lines configuration and note this solidly bullish gap between the red line above the green line. This means that there is still a lot of bull left in this market.
Confusing? You bet!
At first glance this benchmark DOW index [INDU] sure looks bearish and appears to be still declining along with the RSI strength indicator. While the MACD momentum bars are crossing the demarcation line into bearish territory, the MA lines configuration remains bullish with the red line above the green.
So, more conflicting signals by these indexes, which could mean some interesting market action ahead.
Note that the small-caps [SML] and mid-caps [IJH] have to lead the parade for any rally to be sustainable. These two indexes sure got whacked with the rest of the market during last Friday's selloff binge. This caused the respective RSI strength indicators along with the MACD momentum bars to cross below their demarcation lines into bearish territory.
But at the same time the MA lines configurations remain solidly bullish with the red lines above the greens. This could mean that the time is close at hand to get off the sidelines and back into the game again.
But first lets see what next week has in store for the market, while keeping in mind that the small-caps and mid-caps are prime targets to aim at.
Wall Street's fear index the [VIX] had itself a ball as it spiked during last Friday's selloff binge. Now, one of two things usually happen after the VIX spikes like that.
Either the market snaps back into a sharp upside reversal, or it pauses and then trends to the downside.
Next week should tell.
NASDAQ [NDX] was not immune to last Friday's selloff and still appears to be sucked by the gravity-pull into a black hole.
While the MACD momentum bars and RSI strength indicator also crossed into bearish territories, the MA lines did not waver from their bullish configuration with a strong gap between the red line above the green.
That's one sign of a bull's pending return. In this case it applies especially to the technology sectors [TECL] and [XLK.]
In spite of last Friday's turmoil in the markets, the commodity sector [GTX] remained fairly bullish. Sure, the RSI strength indicator and the MACD momentum bars crossed into their respective bearish territories below the demarcation lines, but the MA lines configuration remained strongly bullish with this gap between the red line above the green.
It appears as if the commodity bulls are trying to tell us something.
The bullish percent index [BPS] is still sending out a caution signal with this bearish MA lines configuration, red line below the green.
Yet, this index is still in a consolidation mode which could mean that this bearish sentiment in the market is drying up.
It appears that this index [50R] is still bearish with a small gap between the red line below the green. But keep your powder dry for a rally when this red line crosses above the green.
It looks as if this junk-bond canary [JNK] doesn't care if it rains or shines on the market, it just keeps warbling a bullish tune. Sure, the RSI strength indicator and MACD momentum bars are hiding along their respective demarcation lines, but for as long as the MA lines configuration remains bullish with the red line above the green, so is the market.
Although this cyclical index [PEZ] did not escape last Friday's selloff, the bearish gap between the red MA line below the green keeps narrowing. Once the red line manages to cross above the green, the market will be back in a rally mode.
Of course, [GOLD] along with U.S. Treasuries were safe havens during last Friday's market fiasco. But gold's sharp spike to the upside is still only a "dead-cat's bounce."
In order to signal a genuine advance for gold the spike has to pull back to normal and the bullish gap between the red MA line above the green has to expand.
Surprisingly enough, oil [WTIC] remained strongly bullish during last Friday's selloff. Sure, the RSI strength indicator along with the index and the MACD momentum bars slipped into their respective bearish territories below the demarcation lines.
But for as long as the MA lines configuration remains strongly bullish with a solid gap between the red line above the green, so will the price of oil remain in a slow gear to the upside.
But if you're an oil-bull, keep your fingers crossed, just in case.
Check my Home-Page for more info on ETFs and the markets. Search back for ETF performances during the past months and note those that have performed well under appropriate market conditions.
If they'd performed well then, they'll do so again. Meanwhile,