The DOW has broken through and stayed below the 50 and 200 sma.  It has also broken below the neckline of a classic Head and Shoulders pattern.  The break is not convincing, as the last three days have formed narrow range indecisive candles.  From a fundamental perspective, I am looking for earnings season to give us definitive direction.  This week GS reports as well as JPM.  The CPI and PPI could also move the markets.

The SPX is bouncing along the 200 sma and has not yet broken the neckline of the Head and Shoulders.  Should earnings act as a catalyst, we could see increased volume and follow through as the index decides upon its direction.  The first downside target is 827 and the upside target is a retest of the swing low from 6/23 at 889 and then the top of the right shoulder of the Head and Shoulders pattern at 932.

The COMPQ has been consistently more bullish than the DOW or the SPX but has recently succumbed to bearish sentiment retracing to test support at 1754.  The index is forming a Bear Flag.  The trigger point to the downside is the low from 7/8 at 1727.  If the COMPQ breaks that level on volume, we could trade back down to 1675.  If the bearish move does not materialize, we could climb back to the bottom of the gaps at 1793 and 1824.  If upside momentum prevails we could move beyond those gaps to the swing high at 1862.

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