SPX Closes Lower...Be Prepared for a Break of Support...

SPX and most stocks close lower even after a late rally during last 30 minutes of trading. DJIA - 76.79, -0.82% SP500 - 8.64, -0.85% NASDAQ Comp. - 23.83, -1.19% Russell 2000 - 11.29, -1.96% Exchange NYSE NASD Advancing 862 598 Declining 2,168 2,102 Oil $67.51 -$3.01 Gold $947.00 -$7.70 SOX 294.65 -7.71 VIX 24.27 -0.44 The VIX moved down and did NOT confirm the move down in the SPX on Friday. The SOX confirmed the move down in the Nasdaq. Strongest Sectors: XLV +0.00%...XLU +0.00%...XLP -0.12% Weakest Sectors: XLB -2.52%...XLE -1.48%...XLI -1.43% Seven of nine sectors moved lower on Friday with two unchanged. Healthcare, Utilities, Consumer Staples and Financials were stronger than the SPX -0.85%. Financial stocks stronger than XLF -0.63%: RF, BAC, ZION, NTRS, KEY, MMC, USB, MS TRV, C and WFC. Tech stocks stronger than XLK -0.95%: MSFT, VZ, YHOO, T, ORCL, EMC, GOOG, HPQ, DELL, MA, ADP, IBM and CSCO. Sector Watch Up Trending: XLK, XLB, XLY Horizontal Breakout: XLV Sideways: XLE, XLF, XLP, XLI, XLU Down Trending: SPX Key resistance levels: 1,007 = Nov horizontal resistance 1,025 = 950 Chart target 1,044 = October horizontal Key support levels: 992 = last two weeks low 980 = last broken resistance now support 962 = 161.8% Fib extension 944 – 956 = old January/June/July resistance

The SPX fell from Thursday’s closing level at 1,013 to the 996 support area within the first hour of trading and then traded in a tight range between 999 and 995 until the final half hour of trading when it rose to close at 1,004.09. DJIA volume was 172 million shares which is below its 20 DMA of 207 million shares but equivalent to the volume level of the prior 5 trading days. The trading range for the week was 20.74 points which is the smallest weekly trading range since the week of April 9, 2007 when the SPX traded in a 19.20 range. The following week the range expanded to 31.90 points. The past two weeks trading range of 27.24 and 20.74 points is the tightest horizontal trading range since the first two weeks of June when the SPX closed at 946. The following week the SPX fell to a low of 903 as the trading range expanded to 38.67 points. While the trading range does not have to expand, it is our expectation that it will expand next week.

Technically, notwithstanding the late rally on Friday, the SPX formed a bearish daily candle. The weekly candle was a bearish harami and the first bearish weekly candle in five weeks. Also the weekly price bar is also an inside bar and often occurs prior to a short term reversal. With the failure of the SPX to better the 1,018 high of last week, this week’s high was 1,013.14; we conclude that the probability of downside range expansion has increased and that traders need to prepare themselves for this possibility. Lower highs in many of the larger NDX 100 stocks, MSFT, CSCO, ORCL, INTC, QCOM and TEVA confirm the flatness in Nasdaq indexes this week. Guidance: The intermediate term trend is still up, but be prepared for a break of support. So here are some considerations for next week beginning on Monday, August 17. Up trending stocks AAPL, ACN, CHL, GOOG, PCLN, PWRD and X are in slight pull backs (flag-like) and should the market continue moving sideways to higher, could continue their trends up.

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Weaker to down trending stocks like AKAM, BRCM, ESRX, EXPD, FLIR, FSLR, GENZ, LRCX, SYNA and VRTX are stocks that present down trending trading opportunities should the market break support.

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Stocks with sideways trend characteristics either near support or at resistance like AMZN, BIDU, DECK, ESI, GES, ICE, JEC, QCOM, SWN, TRLG and VPRT are stocks that also present down trending trading opportunities should the market break support.

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Finally, if you are using our Short Term Trend Reversal Strategy, see our October 26 post by clicking here: http://chartsignals.blogspot.com/2008/10/reversal-trading-strategy-overview.html These stocks may be of interest to you: AMX, CAM, MHS, MOS, NFLX, PSYS, SNA (click image to enlarge)

NDX Highlights AAPL -1.64 QCOM -45 cents GOOG -2.28 BIDU -7.64 NDX 100 stocks rising on Friday: ADSK, VRSN, ATVI, HOLX, RIMM, LOGI, MSFT, GENZ and RYAAY. Stocks to Watch on Monday Leading Stocks Holding Above 30 DMA PWRD, CPLA, ACN, PSYS, MHS, SLGN, AMED, AMX, NFLX, BYI, CTSH, AAPL, DLTR, PETS, USD, BIDU, FUQI, GMCR, JOSB, ATW, BAP, CAM, DLB, EBAY, FAS, GES, JCOM, NIHD, PCLN, SNHY, TDG, TRLG, UYG, WRC, ESI, MOS, MUR, WCG, SNA, X, CBST, WAB, BLUD, CLB, JOYG, PCP, URE, WMT, EZPW, MON, RBN, STRA, AFAM, CHL, FLS, PWR, VAR, SPWRA, BKC, DV, GR, CLB, HANS, GXDX, JEC, GME, HLF, BIIB, VPRT, AMZN, DECK, ORCL, RCI, HDB Moving Above 30 DMA = 0 Moving Below 30 DMA = 7 AMZN, GMCR, GXDX, PPD, PWR, SWN, TRLG Staying Below 30 DMA MYGN, ESRX, RIMM, ALGT, APEI, GILD, K, FSLR, GPRO, SYNA, BDX, JW.A, MCD, FAZ, NTLS, ICE Intermediate Term Market Trend: SPX, DJIA, RUT = Neutral, Nasdaq = Up Short Term Market Trend: Neutral