Overall, things are looking bearish after we failed to move above a previous level of resistance as seen in the following chart:

The resistance and support are converging, creating a turning point.

Despite the slight jump in volume today, we have seen the market drift with only one day of above average volume in the month of July. Another interesting point is that this is the first time since April that the S&P has spent more than a couple days above the 50 MA.

It’s worth noting that we could possibly be seeing an inverse head and shoulders pattern:

A possible pattern forming is the inverse head and shoulders.

If we get a boost higher off the moving averages, this could be a legit pattern and we could see the head serve as a bottom. Check back for more.

You also might enjoy:

• Volume floods markets, Monday’s session very important
• Markets Take First Hit, Correction Possible
• Correction Reaches Breaking Point
• Market pops, volume doesn’t
• 50MA proving to be major source of resistance

Here’s a chart:

Here is the current trading channel the Dow is moving within.

Regardless of where I think it will go, the market can still move above resistance. If this happens, watch for a a follow through day and for the market to continue higher.

I’ll do a weekly wrap-up tomorrow. Have a great Friday!

You also might enjoy:

• Volume floods markets, Monday’s session very important
• Markets retreat to averages; Inverse head and shoulders possible
• Dow finds slight support, trades in tight range
• Markets Take First Hit, Correction Possible
• Stock Pick: MATK Bullish Action

Also, volume was slightly higher today than the previous two sessions. Again, if your are short the market, you want decreasing volume on rising days and increasing volume on falling days.

We're seeing lower highs and lows as we move on in time. Until this changes, the market could continue to fall.

I expect the market to continue to bounce around between 10,050 and the moving averages before finally moving below the support.

The thing I would look for to see if the market could go higher is a high volume day where the market moves down sharply and then finishes near/on the highs for the day. Otherwise, expect it to continue lower.

You also might enjoy:

• Market pops, volume doesn’t
• Volume floods markets, Monday’s session very important
• Markets retreat to averages; Inverse head and shoulders possible
• Correction on, but this is not a top
• Dow Touches 11,000; Up on Lower Volume

Above average volume shows an increase in professional trading.

The Dow, NASDAQ, and S&P 500 were all basically flat on above average volume on Friday. Each index finished in the middle of the range which is a bullish sign as they each are near support.

Monday will give us a better idea of where the market is heading. My best guess is that we will get a bounce higher and continue in that direction until we run into resistance around 1080, 1085.

You also might enjoy:

• Markets retreat to averages; Inverse head and shoulders possible
• Markets Take First Hit, Correction Possible
• Market pops, volume doesn’t
• Resistance cleared, double bottom on
• Correction Reaches Breaking Point

It will be interesting to see how the markets react on Monday. The high volume indicates heightened levels of professional trading and a rebound Monday will suggest that professionals were buying, not selling.

The blue lines show the channel the S&P 500 has been moving within for the last couple of weeks.

I don’t expect to fall much further next week. Look for either a hammer near the bottom of the trend channel or a reversal day as the markets move back towards the middle of the channel.

You also might enjoy:

• Strength Emerges; Markets Claw Back as Rally looks Probable
• Flat Week Provides Little Direction for S&P 500
• Markets retreat to averages; Inverse head and shoulders possible
• Volume floods markets, Monday’s session very important
• Correction on, but this is not a top