Week 3 August...

It was a largely sideways week last week as I have expected with the Dow finding lots of resistance around the 13,200 level. It was clear from last week's market action that there was plenty of profit taking out of the previous Friday's jobs report rally. I did say that I expect the Dow to revisit its 30MA before it has enough energy to stage a breakout of the 13,200 - 13,300 points area and I continue to hold that expectation. The series of dojis and the big hangman candle (a candle with a long bottom wick and a small body occurring around the top of rallies), tells me that the market is selling off on the strength and that chances of a short term retreat is in order. However, I continue to be of the opinion that the market is going to break into new highs as this classical reversal out of the intermediate correction continues, but, that process is definitely going to be a rough one as we have seen just before every major breakouts.

This is the third week of August and every third week of the month comes with a series of leading indications, all of which are potential market movers. In the current weak state the market is in, we can expect any negative surprise to start that short term retreat I mentioned above and every positive surprise to have minimal impact due to the predominantly profit taking sentiment in the market for now.