The Weekly Report for August 4th - August 8th, 2008

July 31, 2008- Market Summary
In our previous report, we mentioned that the charts of the S&P 500 and the Dow showed that the bulls failed to bring prices above the levels of resistance, at 11,700 and 1,270. Rallies across the markets had been stopped in their tracks, with large losses seen specifically in all four of the indexes in trading on July 24. We mentioned that it seemed the bears had regained control of the price movement, and predicted that the trend would continue downward in the near term.

We also noted that the Russell 2000 index found similar resistance at 720, at the neckline of the previous head-and-shoulders formation created through May and June. As with the S&P 500 and the Dow, with the recent rally failing to break through significant resistance levels, we thought that the bears seemed to have taken control over the price action of this index. Because the Nasdaq seemed to be in a period of consolidation, we advised that traders wait on the sidelines until a trend is defined.

Charts of interest this week continue to be the S&P 500, the Russel 2000 and the Dow. As the bulls in the Russel 2000 and Dow failed to bring prices above the levels of resistance mentioned in our last report, it seems the bears have retained control of the price movement, and the trend should continue downward. The price was able to break through the resistance of 1,270 in the S&P 500 last week, but it has not yet been able to break above the recent pivot hit of 1,291. Traders should look for a break above this level as a confirmation that the trend should turn upward.

The Nasdaq remains in a period of consolidation. We are seeing the beginnings of a bearish pennant chart formation; the 50-day moving average remains below the 200-day moving average, and has failed to cross above it. Traders are advised to continue to wait on the sidelines in this market until confimation of this pattern is received.

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