12:35pm (EST)

We mentioned this morning the bulls might have a hard time extending their Monday win streak to five but given last Friday’s dramatic rebound anything is possible as we head into the second half of trading.

Earnings will again be in focus this week but the economic news will be just as heavy starting with today’s Pending Home Sales report.  Analysts were expecting Pending Home sales to fall by 1.4% and they came in a percent better at -0.4% for the month.

The news wasn’t much help as the market has extended its losses and some of the weakness can be blamed on Japan’s Nikkei Index as it tanked 3.3%, or 468 points, to close at 13,661.  The volatility has been increasing abroad and here at home and is something that needs to be watched.

The rest of the week includes the Fed meeting and minutes on Tuesday and Wednesday along with the unemployment figures on Thursday and Friday.

Support is once again be tested as the Dow is down 48 points to 15,510 while the S&P 500 is lower by 7 points to 1,684.  The Nasdaq is off 17 points to 3,596 while the Russell 2000 is giving back 8 points and is at 1,040.  The S&P 500 Volatility Index ($VIX, 13.76, up 1.04) has cracked 13.50 as it is up 8% for the session.

We closed a half-dozen trades last week to lock-in profits as we have penciled-in a possible peak in the market and our Watch List is exploding with possible New Trades.  However, we still need to be careful in not opening too many positions until a clearer trend develops.

We have mentioned the possibility of a trading range developing as well but given the events taking place this week and the history of August, we doubt that will be the case.  The technical picture is favoring the bears but if they don’t do some damage this week we could see another run to new highs by the bulls.

We have a few trades in play that are getting some pin action so let’s go check the tape inside the Members Area.  We will be back in the morning with a full report but if we do see something we like this afternoon, we may send out a New Trade Alert.  Otherwise, stand pat with current positions.