Monday’s gap down was short lived as the bulls took over once again. As we move higher week after week, we continue to harp on the Fibonacci levels and targeted support and resistance. The S&P pulled right back to the 38.2% Retracement Monday before moving higher.
We are looking for a break of the trend line in the top-line figures to the upside, but are hedged for a pullback. 
Week 32 put in lighter volume trading and formed a doji on the weekly bar, however the more we move sideways here the more of a bullish bias we will take. Sideways action after a vertical move higher forms a bull flag formation (a bullish chart pattern). While, not much has changed from week 31, the sideways action creates a base of support here which if broken to the upside should send stocks higher.
OPTIONS EXPIRY FRIDAY!
Ben Bernanke Speaks at 10:00 AM ET on Friday (8/21) about the year’s crisis.
Next week watch for a break of 1020 or 980 on the S&P as those are the current support and resistance levels. If we break lower look to retrace back to at least the 980 level, if not further to the $945 area. If we break higher, the 50% retracement would be our target with a price of $1,121 on the S&P.
Another positive week across the board with good news as the employment situation bettered in July. Small Cap and Tech continues to lead the market higher which is common when pulling out of recessions in past.
The S&P500 came right up to our 1007 target level, closing just a bit higher at 1010 on the week. We are also at the 38.2% Fibo retracement level and are showing no signs of slowing. On a monthly chart we see the next potential target to be the 1040-1060 area.
The month of July was quite bullish, however the decline in volume continues as the summer begins to wind down in the coming month. While some of the volume decrease can be attributed to the summer months, it will be crucial to watch what happens when big money steps in again in September.
The S&P, Dow, and Russell are all hovering around their 38.2 Fibonacci retracements, with the NASDAQ approaching its 50% retracement level. Tech being a leading indicator, we anticipate the rest of the top line figures to follow suit.
We saw a tug of war at these levels which was confirmed by the breadth, staying inside 3:1 all week long on the close of the day. We put in a spinning top candle pattern on the weekly bar and two inverted hammers on the daily SPY.
We have two support levels on the S&P500, the 975 level and 945 levels. If/when a pullback occurs; watch how we act around these levels. If we blow right through them then it will be a sign to get out of longs, however if we come down to these levels and chop around watch for volume to be your second indicator or exit or hold.
In the week ahead look for these news announcements to act as potential market movers…
· Mon: ISM Manufacturing Index 10:00 AM ET
· Tues: Personal Income and Outlays 8:30 AM ET
· Tues: Pending Home Sales Index 10:00 AM ET
· Weds: ADM Employment Report 8:15 Am ET
· Weds: EIA Petroleum Status Report 10:30 AM ET
· Thurs: Jobless Claims 8:30 AM ET
· Thurs: EIA Natural Gas Report 10:30 AM ET
· Fri: Employment Situation 8:30 AM ET
The S&P 1000 is our next target, followed by 1007 and 1044. We have support at the 975 and 945 levels. We will also focus on the NASDAQ retesting the 2000 level. If it breaks and moves higher we should see the other indices follow thereafter.
A strong list of bullish names in last week’s watchlist helped drive the market higher, although at a mixed rate with some stocks holding their gains, others giving them back after breaking out. We continue with a bullish bias and will be looking at these names in the week ahead.
AN, AWH, CMG, FIS, MGG, MV, SLAB, STEC, TEF, VECO,
BMI & MSCC ended the week lower and GHDX is forming a good entry point here. We are also adding BKC to our short list for the week. Keeping in mind these shorts are essentially hedges for our bull positions.