Market’s losses on Wednesday and Thursday were Scooped up by Professionals

The stock market dropped hard on Wednesday and Thursday before hitting the brakes on
Friday. Demand came in during the day on Friday to push the close higher until the
day was just barely a loss. Generally speaking, the market’s action during the day
is a much better indicator of future direction then where the market opened or its
first moves. The volume on Thursday was more than twice the average and the highest
since November 2011. Looking in isolation at Thursday’s bar closing at the day’s low
and breaking through support might lead one to conclude there’s a bearish stance.
But the follow-through failed. This tells us that a lot of the volume on Thursday
was made up by professional accumulation. Friday’s volume was also very high. Taken
together, the volume was huge; a lot of shares are now in steadier hands. A relatively
low volume (compared to its neighbors) down bar, especially if it’s in the same range
as Thursday will show that selling pressure has dissolved.

Friday’s low bounced off the mid point of the gain originating from the late February
and early March lows. As long as prices stay above Fridya’s low this also suggests a
move higher. Our Market Sector Relative Strength Table shows widespread losses in the
Cyclicals group. Some of that is positive for the economy. Notably, a 3% loss in the
Energy sector suggests lower gasoline prices on the horizon. But nine of eleven sectors
in the Cyclicals group lost strength as did the core of the technology group.

Relative Strength Chart of the Energy Sector:energy

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