Market Themes and Patterns for a Friday

* Playing a Bit of Catch Up - The market has been giving some interesting readings over the last several days. Small cap stocks, which had been lagging, have recently outperformed their larger counterparts. We now see a relatively even percentage of large caps (38%) and small caps (35%) trading above their 50-day moving averages. We've also seen renewed interest in the NASDAQ 100 issues, 43% of which are now trading above their 50-day benchmark. We have 53% of Dow Industrial stocks trading above their averages, but that number has hardly budged in the last few trading sessions. Rather, we've seen some catch up from those other sectors.

* Not a Robust Rise So Far - We have some good overnight strength this morning on the heels of strong international markets, so I'll be looking to see if that broadly lifts stocks today. One measure I'll be following is the Cumulative Adjusted NYSE TICK, which has actually been negative during this recent market bounce. That bias in selling sentiment has shown up in other measures as well, including tepid advance-decline numbers and persistent high levels in the number of stocks making fresh 20-day lows. On Thursday we saw 480 stocks make 20-day highs, but also 1262 register new 20-day lows. Momentum figures were good for Thursday (Demand was 101, Supply 48) and that seems to be carrying forward this AM. We need to be seeing rising numbers of stocks making new highs, but also fewer stocks making new lows. If we just look at common stocks traded on the NYSE, new lows actually increased on Thursday over Wednesday.

* Carry Trade Comeback - Some chatter this AM regarding economic weakness in Japan and prospects for an interest rate cut. That has renewed interest in the carry trade, with the Yen hovering at multiday lows. The recent decline has also corresponded to this morning's bounce in stocks, so it's a theme I'm tracking.

* Checking Out the Blogosphere - Trader Mike's link update includes some very interesting perspectives on daytrading and subprime implosion, plus an interview with a trading coach. Abnormal Returns weighs in with views on counterparty risk--a major bank concern right now--and rising volatility in equities.

* Historical Trading Patterns - Bespoke Investment Group finds a bearish pattern when the 50 day MA crosses the 200 day MA and also looks at bullish seasonal trends from Christmas to New Year. Trader's Narrative finds a pattern in the market's new highs and lows that has worked out well lately. My recent post found subnormal returns following market dips during periods of falling volatility.

* Training the Brain - Sharp Brains offers an interview perspective on cognitive fitness, including its relationship to physical fitness. See also 10 habits of effective brains.

* Market Direction and Volume - Ray Barros offers worthwhile views from Wyckoff and Market Delta.