The DOW formed a Bull Flag this week after breaking higher on last Friday’s session.  The index has been moving in a sideways trading range for most of August.  The immediate upside target is the high from Friday’s session at 9630.  Then look for 9654, 9794 and 10365.  Support resides at the low of the flag at 9459 then 9438 and 9117.  We will just have to wait for the index to decide where it wants to go.  If we get a break out of the flag with decent volume, that will be key.

The SPX is also in a flag pattern. The top of the flag at 1039 is the first upside target with 1044, 1106 and 1134 the next on the radar to the north.  Support is at the bottom of the flag at 1016-1018 and then the swing lows from 8/17 at 978 and 7/29 at 968.  I’m waiting for a break.  Don’t guess, just follow it and hop on board.

The COMPQ attempted to break out of the flag on Friday, but was beaten back into the consolidation.  The first upside target is Friday’s high at 2059 then 2070 and 2211.  Support resides at the low of the flag at 1993 then 1962-9.  The entire gap from 8/14 – 8/17 at 1969 – 1949 will act as good support.  Finally, the swing low at 1930 should provide significant support.

I am still bullish until the market tells me otherwise.  There are many that have tried to short this market too prematurely and gotten hurt by doing so.  Let the market tell you what to do.  You don’t have to get the first part of the move.  When a correction happens you will know when to optimize the turn.  I am currently delta neutral and selling premium.  When the market breaks from its current consolidation then I will adjust and profit from the directional move.

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