Expect the Sideways Movement to Continue

August 28, 2006 · Print This Article

The trading week before the last summer holiday is historically slow and I do not expect to see a change in the pattern this week. The S&P (SPY) and Nasdaq 100 (QQQQ) have moved into an overbought territory and a few other short-term bearish technical indicators are popping up on the screen. As a result, any attempt to extend today’s gains will most likely be limited and should bring the sellers out over the short-term. The next few days are seasonally bearish and given the overbought situation and the gap from 8/16 in the S&P that has yet to be closed the probabilty of a short-term decline has increased. I would also point out that Thursday (the last trading day of August) has been seasonally bullish and so has the first few days of trading in Septmeber. After the short stint of historical bullishness passes, we should be prepared to see some volatility. September is historically the worst month for the market and if we enter it with an overbought situation the contrarians will most likely be out in full force. Have a great night!

RSI Wilder (5) for August 28, 2006