Friday’s session opened slightly below Thursday’s close and right at trend line resistance and traded vigorously down to form a Bearish Harami on low volume.  Price is now just above the 50 day sma.  If the dow breaks this major moving average, the next stop is strong support between 11340-11380.  Volume will be returning to the markets and we have a full economic calendar this week that could move the market.  Hurricane Gustav could have a major impact as well as reaction to McCain’s VP pick and the Republican National Convention.  Look for the Dow to be be bearish this week.

The SPX is in a trading range between 1267 and 1317.  The trend line which was formerly support is now acting as resistance.  We feel that there will be selling pressure driving the index lower this week.  Let’s see how the market reacts to this week’s economic reports as well as Gustav and the RNC.  Watch for breakout from consolidation.  If that happens with gusto (volume)  that will be significant.

The NDX is resting right on the 50 day sma and has exhibited a very bearish picture.  We have a bearish 3 day candlestick pattern and bearish crossovers on the RSI, MACD and the 5/20 EMA.  If the NDX breaches the 50 sma with conviction, the next stop could be 1825.  We’re short here.

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