After a tumultuous early-week slide, small stocks righted the ship and closed out the first week of May with a mild advance. The market continues to punish fresh money on both sides of the street with volatile swings as it battles familiar resistance in the 830 zone.

Along the way, day traders have been fed two weeks of sterling chart patterns that foreshadowed quick, but rewarding moves. The dominant pattern from last week was a big bullish “hammer” bottom on candlestick charts on Tuesday’s low. These hammer formations are often seen at critical long-term bottoms in the stock market, but they carry a little less convincing bite in the upper portion of a bull run. Still, it was a welcome sign for anyone gasping at the rapid descent off our 830 resistance area.

In addition, the Russell 2000 managed to navigate a troubling April seasonal without any real chart damage, or any sustained equity pullback, for that matter. What’s more, last week’s recovery move took place amid substantial event risk in the form of the employment report. A convincing topping pattern away from critical resistance in the shadow of troubling data would have been a tremendous concern, but for now those issues are simmering instead of searing. Last week marked an important test for the bulls and although they bent early in the week, the comeback was impressive.

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