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WEEKLY CHARTS

If support at 10350 continues to hold, expect a rally towards the 10600-10650 zone.

If support at 3650 continues to hold, it will re-test resistance. If the 3650 level is violated, then we can expect a decline to 3500-3400.

If support at 1200-1190 continues to hold, expect a rally towards the 1230-1235 zone.

If support at 2100 continues to hold, it will re-test resistance at 2200. If the 2100 level is violated, then we can expect a decline to 2050-40.

Stuck between resistance at 220, and support at 200. Regardless of whether it breaks out or down, the magnitude of the move will be at least 10%.

Once again, it made it back up to channel resistance. In the previous two occasions it failed to get through, and the price declined nearly 30% over an 8-10 week period. It makes sense to be prepared this time around, just in case things do not play out as they did in the past. Pay attention to the $62.5-$60 support zone. If price  stays above it over the next 1-2 weeks, it consolidates and then it attacks channel resistance. In all likelihood, we'll get a break-out, which would give an upside target of $100.00.

The T.O. is rising, which means we can get another push to the upside early this week.

The trend is NEUTRAL for NASDAQ.

The trend is DOWN for the SP.

Summary

Last week we said, "All major indices managed to close below support for the week, while most technical indicators remained deeply in negative territory. Consequently, the odds favor that the indices will make contact with the first downside targets listed on our table, which are only 1.25%-2% below current levels. The question is, will they stop there? More than likely, yes. Unless the market is about to collapse, the first downside targets ought to provide--at least--a temporary respite for the very simple reason that as it stands right now, the Volume McClellan Oscillators for the NDX, and the OEX are very close to the -100 level, indicating a deeply oversold condition, which usually acts as the "starter fluid" for a rally. In addition, the market has a historical tendency to rally during the week that precedes Labor Day, therefore, although market participants must be cognizant of the negative technical picture, they also have to be on alert for a rally, especially if they have profits to protect from existing short positions. If the market follows its historical pattern, then the most likely scenario would be a  continuation of the decline into Tuesday, and then a reversal and a rally into the end of the week. In the absence of any exogenous event that would justify a sell-off, the real news would be if we get the opposite type of action, such as a rally during the first part of the week, and a sell-off going into the Labor Day weekend, because it would indicate a change in "character" induced by a change in investors' psychology. In bear markets, investors are more risk averse than in bull markets; thus, they have the tendency to buy early in the week and they book their profits at the end of the week because they do not feel comfortable holding positions over the weekend, especially during a long holiday weekend. The opposite holds true, in general, during bull markets. Consequently, if we get a sell-off going into the holiday weekend, the message to be derived from such action would be that market participants are becoming more risk averse, and less enamored with the equity markets."

(CURRENT) The indices followed their historical pattern declining into Tuesday, and then rallying to end the week with gains, despite some  minor losses on Friday. From a technical point of view, we got a total  "mixed bag."  Most indicators are either a handful of points below, or, above their respective zero lines implying that the odds favoring either higher, or, lower prices are almost even, and thus, we can't dismiss either outcome.

Based on the patterns exhibited by price, and by the technical indicators, the two most probable scenarios are illustrated in the two graphs below. Keep in mind that the odds favoring either  scenario are roughly even, therefore, we need to pay attention to daily resistance at 1230, and daily support at 1210.  If the SP is below 1210 by mid-week, then more than likely scenario#1 will end up playing out. Conversely, if the SP is above 1230  by mid-week, then more than likely scenario#2 will end up playing out ( READ:  OPTIONS REPORT)

Ike Iossif

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