The Weekly Report for July 28th - August 1st, 2008

July 27, 2008- Market Summary
In our previous report, we mentioned that the charts of the S&P 500 and the Dow seemed to have notched a short-term bottom and that the indexes were in the process of testing the resistance of their March lows (11,700 and 1,270, respectively). A failed move above these levels would result in the bears taking control of the longer-term direction, which is why investors were advised to continue to wait on the sidelines in the hope that the volatility will return to normal.

Charts of interest this week continue to be the S&P 500 and the Dow, as the bulls failed to bring prices above the levels of resistance mentioned last week. Recent rallies across the markets have been stopped in their tracks, with large losses seen specifically in all four of these indexes in trading on July 24. Going forward, it seems the bears have regained control of the price movement, and the trend should continue downward.

The chart of the Russell 2000 index found similar resistance around 720 this week, at the neckline of the previous head-and-shoulders formation created in May and June. As with the S&P 500 and the Dow, with the recent rally failing to break through significant resistance levels, the bears seem to have taken control over price action of this index in the short term.

The Nasdaq seems to be in a period of consolidation. We are seeing a relatively trendless movement, and the 50-day moving average remains close to the 200-day moving average, but has failed to cross above it. A horizontal channel with support and resistance at 1,775 and 1,875 seems to have been formed, and so a break above or below these levels should indicate whether the bulls or bears will take this action forward in the short term. Traders are advised to wait on the sidelines in this market, until confimation of a trend is defined.

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