Monday, the SPX breached the trend line and has now bounced back up to retest that level. Should the index break through this area, the next stop would be some minor resistance at 1317 with major resistance at 1340. Should the SPX stall at current levels, it will probably go down to retest the swing low at 1264. 1264 is fairly stout support and a break there will signal the beginning of a strong bearish move. There are three swing lows on the way to major support at 1200 (refer to the charts of 8/15 for specific swing low price levels). Each of those swing lows could provide a cause to pause the move but most likely only a brief pause on the way down. It’s my belief that the last three sessions have had no conviction with enemic volume. IMHO, it’s a head fake and my money is short. However, you need to do your own due diligence.

The NDX has formed a classic cup and handle chart pattern. A break above 1975 would be very bullish. Friday gapped up on low volume off of Thursday’s low volume “Hammer” and the 20 day EMA. Let’s watch how the market performs Monday to see if there is any follow through. My sense is that the NDX is headed down. When summer ends and liquidity returns to the markets, I feel that volume will be bearish. I’m short here as well. I don’t feel that the Bulls have enough steam to take this index beyond 1975. Again, do your own due diligence before commiting any capital.

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