After it was all set and done, for the month of August the S&P 500 rose about 1.50%, but at its peak was up about 3.45% for the month.  The Russell 2000 index too closed the month well off its intra-month highs, yet the Nasdaq 100 relatively speaking pushed higher right through the end.  But then again that’s simply all due to Apple (Nasdaq:AAPL) and everyone knows it so let’s move on.

Albeit Friday was a whacky session thanks to the Bernanke, it didn’t alter the charts all too much and as such from a technical point of view there is hardly much to add to what I wrote here on Friday morning.

As we just finished a month let’s zoom out on the charts a little more and look at them on a weekly basis (weekly bars on the chart).  From that point of view the S&P 500 has continually made a series of higher lows and even some higher highs since the autumn of 2011.  Of course the significant higher high remains to be made and would be accomplished should the index push and close above the 1425ish area on a daily and preferably on a weekly basis.  The Wilder Relative Strength Index (an oscillator measuring price momentum) still shows room higher into the overbought territory and as such us one thing the bulls point to.

To calm the nerves of some readers however let me say that the above is simply the technical point of view and while interesting to use as reference points should not be considered the holy grail of analysis.  Structural and fundamental analysis are also to be applied.

Anyway and either way, I for one reiterate my stands from last week for now; I favor 1440 as a next upside target on the S&P 500 but any move below 1390 with much force would get me to flip short.  I am also very little invested at this point and thus mostly sitting in cash, so my long-side bets are very limited.

Why such hesitancy Berger you ask?  Well, August has been a quiet month and while some welcomed a snoozy August at the beach (compared to last year’s nuclear fireworks in August) there are also major news items ahead this week.  Any of them could easily lead the S&P 500 and any other equity indices for that matter to break out of their boring average true ranges of late.  To be clear, that is far from saying that I see markets really tanking in the weeks ahead – although they could.  I am merely saying that volatility in itself and thus most likely the average daily market ranges will increase.  Intra-day swings so to say, may increase and could quickly catch anyone with ‘tight’ stop orders or an unprepared mind for such moves off guard.

Whether or not it will be a September to remember remains to be seen but instead of leaning out of any windows I prefer to enter a September month with a lean and mean portfolio, ready to deploy cash long or short when the time is ripe.

Have a great week

Serge

 

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