SPX at Support Forms Piercing Line and MACD Divergence...

DJIA                           10,193.39 +125.38 +1.25%
SP500                           1,087.69  +16.10 +1.50%
COMPQ                        2,229.04  +25.03 +1.14%
Russell 2000                    649.29   +9.25 +1.45%

Exchange                  NYSE              NASD
Advancing                  2,346              1,757
Declining                       753                 954

From its Friday May 14 close of 1,135, the SPX fell 80 points to its 1,055 early Friday morning low and then rallied 32 points on strong buying to close at 1,087. The SPX was down 48 points or -4.2% for the week.

Look at these Charts

(click image to enlarge)

Thursday night in the Talk I spoke about the importance of being contrary at turning points in the market not all the time. I reminded everyone of a the bearish harami and our Yellow Alert last Thursday and the ensuing down move.

Now the technical evidence, a MACD bullish divergence at support was suggesting the possibility of a move up. Friday delivered at least the first up day. While the future may be nothing like the past, the SPX moves in July and February after the last two bullish divergences suggest it would be unwise to ignore the bullish divergence like most traders did last July and February. Go back an read our prior posts if you have forgotten what we wrote in July and February.

Look at this Chart

(click image to enlarge)

I also spent a good part of the Talk Thursday teaching listeners to find the stronger up trending stocks and then detailed exactly to the penny how to determine an entry point, a stop and a target one and two for the trade. I illustrated the concept on BIDU in the real time virtual account.  That trade filled on Friday as BIDU did bounce.

I also suggested several other stocks that would fit the pattern. I also listed "Setups for flag bounce: BIDU, WFMI, NFLX, NTRI, HANS" in Thursday night's post.

Look at these Charts

(click image to enlarge)

Dave's Insight: Continue to Follow Your Rules.


Guidance:
The SPX formed a piercing line candle on Friday with a support bounce rising to Thursday's R1 level. Friday's 32 point rally from 1,055 indicates that buying is strong at this key horizontal support level.

Trade weak stocks down. Continue to trade the bounce off resistance and a break of support to the next support level.

Trade strong stocks up. We saw some entry signals on Friday with the support bounce. We will look for additional entry signals on Monday and a potential support bounce continuation move. We will look for a break of Thursday's 1,089 R1 level as evidence of a support bounce continuation.

The VIX fell -5.69 and closed at 40.10. On Thursday the VIX made it highest close since March 20, 2009.

The short term trend is down.
The six-month trend is neutral.
The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch, trade with the trend and follow your rules.

Adjust your stops according to your rules for up and down trending trades.

AAPL +4.56
QCOM +0.30
GOOG -2.96
BIDU +3.27
NDX 100 stocks stronger than the NDX include: MRVL, JOYG, PCLN, CTSH, WYNN, BIDU, FWLT, FSLR, ADSK, INTU, LOGI, AKAM, URBN, STLD, NIHD, LINTA, ISRG, EBAY, BRCM, CERN, SIAL, AMZN, YHOO, PCAR, FAST, BBBY, INFY, NVDA, CHRW, ERTS, LRCX, MCHP, AAPL, MICC and DTV.

Stocks weaker than the NDX: DELL, VRTX, CEPH, LIFE, ATVI, GILD, MSFT, AMGN, HANS, ORCL, VRSN, GOOG, BIIB, ILMN, SYMC, RYAAY, APOL, GNEZ, SHLD, PPDI, CHKP, IACI, TEVA, AMAT, ORLY, GRMN and RIMM.

Stocks to Watch on Monday
Holding Above 30 DMA
EXBD, NTRI, FAZ, ESI
Moving Above 30 DMA = 3
NFLX, SNDK, OSTK
Moving Below 30 DMA = 0

Staying Below 30 DMA
HAS, WFMI, BYI, DHR, GR, MCD, UNT, WHR, WMT, ICE, ZION, CRM, STI, PNC, AIV, HLF, AMD, ATI, CAT, CREE, DECK, LVS, SPG, SWK, UNP, URE, WFC, BA, DE, JEC, LXK, CHL, GME, SYNA, HANS, ACN, MYGN, AMX, BKC, DOW, FAS, FLS, PCLN, PCP, TSL, UAUA, USD, USO, UYG, ATW, BAC, GES, MA, V, CAM, SWN, BUCY, WLT, CLF, MHS, WCG, GMCR, GS, FCX, X, PWRD, AGU, IPI, POT, MOS

Intermediate Term Market Trend: Neutral
Short Term Market Trend: Down