Good morning! The market saw another rather weak day on Friday. It began with a Bear Flag forming in the premarket futures after dropping out of the jobs data at 8:30 am ET. This Bear Flag was most pronounced in the SP500 (ES), creating a short pattern heading into the open. This meant that we did not get a longer 120 minute base for a larger Head & Shoulders as I had suggested, but it was a nice opportunity for the bears going into the day. As the flag triggered, it also confirmed a breakdown in the NASDAQ Composite and Dow Jones Ind. Ave. on the 15 minute charts and kicked off a strong morning downtrend.

The 5 minute Bear Flag hit support initially around 10:30 ET before pulling up into the 5 minute 20 sma resistance zone. The NASDAQ had nearly put in an equal move on the 15 minute charts as compared to the prior selloff. This meant that going into noon I began to look more towards a 2B reversal pattern on the 15 minute charts than another strong selloff in that index. The SP500 managed to put in another decent move on the 5 minute charts with a Bear Flag, creating an equal move on its 15 and 30 minute charts going into noon, but the NASDAQ held 1605 support in the NQ EMini and began to turn over.

The NASDAQ tried initially for a 2B on the 15 minute charts just after 11:30 ET, but then formed a 2B on the 2 minute charts right into the 12:00 ET reversal period. The reversal period was a strong factor leading into the correction and the SP500 and Dow both formed shallow Phoenixes on the 1-2 minute charts to help correct the market into the afternoon. With the weak dailies, however, the action off the lows was very gradual and as soon as the 15 minute 20 sma hit, the move stalled.

After the 13:30 ET pivot high off 15 minute resistance, I called it a day. Following a strong morning move and the new downtrend on the 30 minute charts, it seemed unlikely that we would see low risk opportunities the remainder of the day. The market had put in a very obvious high on the daily charts due to the change in pace out of the highs and the break in the range, meaning that few would care to risk buying anything ahead of the weekend. Additionally, many of those wanting out with such a strong pivot would likely have done so already.

On the weekly charts, nearly every sector came to a strong halt last week. The NASDAQ Comp. is holding those prior highs we were looking at from late last year and most sectors had similarly strong resistance levels. Those that had been making new highs recently for instance were coming into equal moves on the weekly charts as compared to their prior rally, most of which took place at the start of the year and then continued in May. It is most likely that we will see a rather substantial correction in coming months and I would use a lot of caution on new longer term buys. Typically a more significant correction in the market would come in October, so we might see a bit of choppiness until then, but I am backing off on new position trades at this time as buys. One stock I am watching is a short in QLGC as a longer term hold.

Updates: VAR from last the 20th $38 around hit new highs the 27th at $40.70 before closing on the day with a base at highs ahead of earnings for swingtraders. For a larger position trade the weekly is still looking nice and I want the 20 week sma to hold as support. I am watching HSP for a breakout on the daily and weekly charts, but it can easily take a few weeks to even a few months to develop with the 20 week and 20 month simple moving averages serving as support. AEP is also of interest in a couple of weeks for an upside breakout, but GP, which we were also looking at last week, has broken down too much and I am no longer watching it.

Economic Reports and Events
Aug. 08: -
Aug. 09: Productivity-Prel for Q2 (8:30 am), Wholesale Inventories for Jun (10:00 am), FOMC policy announcement (2:15 pm)
Aug. 10: Treasury Budget for Jul. (2:00 pm)
Aug. 11: Initial Claims 08/06 (8:30 am), Retail sales for Jul. (8:30 am), Retail sales ex-auto for Jul. (8:30 am), Business Inventories for Jun (10:00 am)
Aug. 12: Export Prices ex-ag. For Jul. (8:30 am), Import Prices ex-oil for Jul. (8:30 am), Trade Balance for Jun (8:30 am), Mich Sentiment-Prel. For Aug. (9:45 am)
Aug. 15: NY Empire State Index for Aug. (8:30 am)
Aug. 16: Building Permits for Jul. (8:30 am), Core CPI for Jul. (8:30 am), CPI for Jul. (8:30 am), Housing Starts for Jul. (8:30 am), Capacity Utilization for Jul. (9:15 am), Industrial Production for Jul. (9:15 am)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Aug. 08: AL (B), ACF (A), CNP (B), XEC (?), CRAY (4:00 pm ET), CVTX (A), DPH (B), DNDN (?), DYN (B), FLR (A), HMY (?), HRP (B), LAMR (B), NT (B), PTV (A), POM (?), PXP (?), SCLN (?), PKS (A), SONS (A), STKL (A), UPCS (A), VC (B)
Aug. 09: APCS (A), AQNT (B), BBI (?), CVC (B), CE (B), CBB (B), CSCO (A), CCU (B), CDE (B), DISH (?), ESCT (A), EIX (?), EP (B), FLYI (?), GEMS (B), GKIS (B), IIP (A), KFX (?), KG (B), LGF (A), LOUD (?), MCIP (B), TMR (?), NRG (B), NTLI (02:00 am ET), PA (B), PNRA (A), RL (B), SIMG (B), MAY (?), PGR (B), TLCV (B), URI (?), DIS (A), XOMA (A)
Aug. 10: AAP (A), AVT (?), CNR (?), CPST (4:45 pm ET), RIO (A), FD (?), INCX (A), MNTA (B), NWS (A)
Aug. 11: ADI (A), BGO (A), EAT (B), CREE (B), DELL (A), DT (02:00 am ET), DWA (A), ELX (?), FMD (A), HSP (B), ICST (?), JJZ (B), JMDT (A), KSS (?), NVDA (A), PSUN (A), PHH (A), TGT (B), TLWT (B), UBB (?), URBN (B)
Aug. 12: ALTI (?), ERJ (A), MOVI (B), PBR (?)
Aug. 15: A (B), MIVA (B), GG (A), KEP (B), LOW (?), PLAB (?); SYY (B)
Aug. 16: ANF (A), AEOS (B), AMAT (4:30 pm ET), BJ (B), DE (B), HPQ (?), HD (B), JCP (B), JWN (?), SPLS (?), EL (B), TJX (B), WMT (B)

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.