This past week was a very mixed one for the market overall. The Dow Jones Industrial Average ($DJI) fell 0.63% on the week to close at 11,659.90, while the S&P 500 ($SPX) was essentially unchanged for a gain of 0.15% and ended the day on Friday at 1298.20. Both indices took a beating early on in the week due to financial-sector downgrades. The Nasdaq Composite ($COMPX), free from the weight of weakness in the financial, energy and oil-related sectors that assisted in holding the Dow and S&Ps down over the past week, managed a gain of 1.59% by week's end to close at 2,452.52 on Friday. The Russell 2000 ($RUT) faired even better, up 2.6% on the week with a close at 753.37 on Friday.

Last week began on Monday with a continuation of the patterns we have been following over the past several weeks on the daily and weekly time frames. The indices hit strong support in mid-June and began to roll over up off those lows into the second half of the month. Several weeks ago the indices confirmed the correction when the Dow and S&Ps both formed two-wave buy setups (in the form of a Phoenix) on the daily time frame and the Nasdaq broke through the highs of its July trading range. These indices both hit resistance, however, when they established equal moves on the 60-minute charts as compared to the rally off the lows a week earlier (shown in blue on the 60-minute charts). At the same time the Nasdaq also struck that first daily resistance level I had drawn on the chart last week which corresponds to the congestion level from mid-June in that index. Although not displayed on the charts, the Russell 2k ran into highs from early in June to hit a strong resistance level in that index as well early last week.

Dow Jones Industrial Average ($DJI)


After striking price resistance on Monday, the indices had trouble continuing higher last week. From Tuesday onward they took a break, pulling back for several days into lower trend channel support and the 20-day simple moving average in the Dow and S&Ps. As with the two-wave pullback from the week before, this correction off Monday's highs also came in two waves on a 15-minute time frame. Mid-day on Wednesday is when support hit for the indices. The pace of the selling slowed and the market rolled over off lows on a 15-minute time frame into the afternoon.

Three waves of buying followed Wednesday's reversal on a 15-minute time frame. These are most notable in the S&Ps and Russell 2k. The third move came into the open on Friday and exhausted the intraday trend. This created a slow and lackluster trading environment for the remainder of Friday's session, so the volume on the day as a whole was the lightest of the week. The momentum has remained stronger on intraday upside than vice versa, so this favors more buying into Monday, but the larger intraday time frames are favoring a reversal off highs once again rather early on in the week. Such correction would likely break the uptrend channel for the past several weeks. Sometimes an upper channel level can build momentum to break higher, shifting momentum on smaller time frames to aid in such a breakout. This is possible given the current development and the fact that the weekly time frames still have a lot of room to move before they hit higher level resistance, but I would prefer to see a flush lower on a 15-60 minute time frame first.

There are a number of things than can lead to a larger pullback on the daily time frame (while still holding weekly support) right now. For one thing, oil prices have dropped sharply in recent weeks, but are showing some signs of stability on a daily time frame for a modest correction off lows. This can be seen on a 60-minute chart where there have been some slightly lower lows and rounding off. As we saw on the daily charts of the indices, however, it is not uncommon to get a flush or two when this happens before a low is really established. This would mean that a false attempt to bounce would likely push the indices lower on the 60-minute charts, but when oil again picks up on the downside it can then send the indices sharply higher into the next daily and weekly resistance level.

S&P 500 ($SPX)


Oil, gasoline and other commodities have continued to grab headlines recently. While spring and into early summer was dominated by the constant setting of new record highs, the second half of the summer has made the news by record downside moves. Crude oil fell another 1.24% last week to $115.20 a barrel on Friday. While still up $18.54% on the year to date, this is a 22% drop off July 11 highs. Many lead analysts are expecting prices to continue lower before finding monthly support. I agree. Larger time frame support levels for crude are the March congestion zone for about $112.50 a barrel (with the range from $100-$115) and then the congestion late last year into this. That range was from $88ish at lows to $100 a barrel at highs. $100 is obvious whole number support, but the middle of a trading range tends to hold better longer term, so I suspect it (crude oil) could easily slip into the $90s by year end.

Americans are finally seeing the result of this price drop at the pump. On Friday the average U.S. retail price of gasoline was $3.771 a gallon. This is an 8.3% decline from July 17's highs of $4.114 a gallon. Prices here in southern Florida tend to track the national average quite well and I was able to fill up on Saturday for $3.64 a gallon for regular, while midgrade was going for $3.75, which was down further from Friday. Interestingly, for the first time since 1982 U.S. consumers have spent more on gas than they did on cars.

Closely related to the drop in crude oil prices is the rally in the dollar and corresponding collapse of the euro. The U.S. dollar index is up 5.28% on the month, while the dollar in euros is up 6.25%. This put them both positive on the year to date. The euro in dollars in down 5.82% for the month, up 0.53% year-to-date. The dollar is up 7% against both the euro and the British pound since the end of June. The European economy has been showing signs that it is starting to weaken lately and this, combined with the events unfolding in Russia, have assisted in shifting investments back into the States. Adding to global tensions with the United States in relation to Russia was news late last week of Poland's agreement to allow the U.S. to create an antimissile defense system located in Poland.

Nasdaq Composite ($COMPX)


This past week was a very busy one from an economic perspective, particularly from Wednesday onward.

On Wednesday the Commerce Department announced that retail sales fell 0.1% in July. Excluding a 2.4% decline in auto sales, the seasonally adjusted retail sales rose 0.4%. Excluding a 0.8% rise in gasoline sales, retail sales fell 0.2%. Retail sales are up 2.6% over the past year. This is a 0.2% increase when excluding gasoline sales. The data as a whole was better-than-expected and was assisted by an upward revision from 0.1% to a 0.3% gain in June.

Import prices rose 1.7% in July for a 21.6% increase over the past 12 months. A large portion of this advance was due to petroleum imports, which rose another 4% last month, while natural gas prices rose 5.8%. This was larger-than-expected. For the year up to July, petroleum import prices were up 79.2% and natural gas prices were up 75.5%. Meanwhile, U.S. inventories rose 0.7% in June, higher than the expected 0.6% increase, while the inventory-to-sales ratio fell to a record low of 1.23.

On Thursday the Labor Department release its consumer price and jobless claims data. U.S. consumer prices rose more than expected in July. The 0.8% increase now places consumer prices up 5.6% over the past year, which is the largest increase in more than 17.5 years. The core consumer price index, which excludes food and energy prices, rose 0.3% in July. Economist had expected an 0.5% rise on the CPI with an 0.2% increase in the core CPI.

First-time applications for state unemployment benefits fell 10,000 to 450,000 for the week ending on Aug. 2. Although lower than the previous week, the smoothed trend in new claims is now at its highest level in over six years. A new federal program has created encouragement for more unemployed workers to file under regular state programs and it makes the number of new layoffs unclear.

Completing the week, the New York Federal Reserve Bank reported that U.S. factory output rose 0.4% in July. June's industrial production was revised lower to a 0.4% increase. On a less favorable note was the University of Michigan's index of consumer sentiment, which climbed only slightly to 61.7 in August.

Earnings season is nearly over, but a few key names have yet to report this week. On the home improvement retail front are Lowe's (LOW) on Monday and Home Depot (HD) on Tuesday. Hewlett-Packard (HPQ) is also due out on Tuesday. It is expected to earn 87 cents a share with revenue or $27.3 billion for the past fiscal quarter. Both Home Depot and Hewlett-Packard's results will impact the Dow this week. Discount retailers Target (TGT) and BJ's Wholesale (BJ) also report this week on Tuesday and Wednesday, respectively. These will be some of the key names to keep an eye on for momentum plays this week.

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.