Earnings are center stage while budget concerns persist

NOTICE: I'll be on vacation from Wednesday, April 13 to Monday, April 18th. This column will resume Monday evening.

Good day! The market has spent the past week coming to terms with the extended upside move of the rally off mid-March lows. Throughout the week we've seen the type of action I wrote about heading into it play out. The momentum shifted in many securities, creating a rounded affect at highs that served to trap bulls, leading to some strong pullbacks into the second half of the week.

It hasn't all been all peachy for the bears though. In fact, many securities held up well throughout the week, particularly those tied to gold, silver, and oil, as well as the semiconductors. Silver continued to hit record highs not seen since 1980, while gold hit new all-time highs and oil continued its upside breakout to multi-year highs. Gold traded as high as $1,476.20 an ounce on Friday, while silver hit $40.608 an ounce. Gold was up 3.2% for the week, while silver was up 7.6%. Crude oil hit $2.49 a barrel on Friday, while gasoline prices rose to $3.730 a gallon.

Dow Jones Industrial Average (Figure 1)

Many stocks teased both the bulls and the bears as they ricocheted back and forth between the week's highs and lows. MKS Instrument (MKSI), which I wrote about Thursday evening, was one example. It slowed and began to sell off at the beginning of the week, but went for a slightly higher high mid-week before finally relenting to a stronger selloff on Thursday and Friday.

The week was full of false breakouts on the upside as well. Kennametal Inc. (KMT) triggered a strong Phoenix buy setup on Wednesday, for example, before falling back with the rest of the market into the weekend.

The indices themselves have been taunted by both sides. Steep selloffs have been met with equally strong recoveries and even a series of slightly higher highs in the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI).

S&P 500 (Figure 2)

It wasn't until Friday that we saw the bearish bias that had been developing into last weekend really begin to offer confirmation in the overall market. It started with the steep drop on Thursday morning following news of another earthquake off Japan, but the recovery off Thursday's lows marked the first major shift in momentum within the larger trading channel for the week.

The market's recovery was extremely gradual off Thursday's lows. Even though the indices managed to retake prior highs in the early-morning hours on Friday, the momentum of the recovery never increased as it had in the recoveries that took place throughout the earlier part of the week. Instead, it remained steady and slower than the prior breakdown. This added strength to earlier highs as resistance and gave the bears a huge advantage heading into Friday's opening bell.

Nasdaq Composite (Figure 3)

Once the uptrend channel heading into Friday's opening bell broke on the downside, the selling remained strong. The indices paused to catch their breath mid-day, but based at intraday lows on light volume before triggering a continuation out of the 14:00 ET correction period. This breakdown gained momentum over the next hour, but the indices cut their losses in the final hour of trade.

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