“The charts are still showing mixed signals with the Dow and Russell 2000 pinned under their middle uptrend channels while the S&P 500 and the Nasdaq are showing some strength. The VIX appears to be headed lower but volatility is at historic levels that often signal a reversal.
Earnings are starting to wind down with nearly 450 of the 500 S&P companies having confessed. The numbers are showing nearly 70% of them have beat earnings but we are more interested in how many companies missed on revenue and lowered guidance.
The tight trading range is normal during the summer doldrums and the test at this next level of resistance has come on very low volume. There were no convictions on any of the pops higher throughout the week as you can also see in the charts. Wall Street is bracing for the Fed and Europe (and now China) to do something by the end of the month.
While this week is options expiration, which usually brings added volatility, it wouldn’t surprise us if the market stayed range bound near the top for another week or two and pushed new highs. Economic news this week has the potential to move the market 2%-3% which would get the indexes near their peaks for the year or back to near-term support which we have outlined.
Again, we can be bullish if we need to be but we are still expecting a trading range that could produce a test to the 2012 highs or a slight pullback to support which was prior resistance – until the Fed or Europe makes a move.” (from 8/12/2012 Weekly Wrap/ Monday Morning Outlook)…
The bulls continued their winning ways as the market moved higher for the sixth-straight week and cleared another layer of resistance. The major indexes are within spitting distance of reaching new highs while the bears wait patiently for the end of the month to arrive.
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