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Markets Trapped in a Range
Most markets have been marking time as we head into the end of the week and approach the end of August and in spite of several attempts by the S&P 500 to sell off, it keeps coming back hugging the underside of the all important 1,300 level. In view of this, we would be inclined to interpret a break above 1,300 as a potential buy signal and a revisit towards the lows of the week at 1291.70 as more of a negative signal that could be detrimental to the overall weekly and monthly structure. On the other hand, the S&P 100 or OEX is acting like a completely different market that is just a stones throw from not only making new all time highs for the year, but post 9/11 new highs also. This is significant, because it suggests that the Top 100 Companies are unfazed by interest rate hikes and the so called threat of a weakening economy. Meanwhile at the broader end of the spectrum, the Russell Index of 2000 companies although acting significantly weaker in a broadening range at the bottom of a sustained decline since early May, although technically uninviting, does not preclude the possibility of rallying substantially higher should the last few months trading range, become an excuse for a reverse head and shoulders bottom but in the event of any further breakdown by the markets, that might be wishful thinking and would almost guarantee new lows for the Russell and probably the Transports as well, which would not be a good omen going into a month''s end lower close. And yet there is an argument that the Nasdaq 100 and Composite Indices could potentially have already bottomed for the year. We have seen some impressive impulse waves to the upside which leads us to the view that in the event of a sudden upside breakout, we could see a sustained run higher.
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NOTE: Please click on the charts below to enlarge them if [read more]
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