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[dodjit]

Investors pressed the sell button yesterday, preferring to take profits on recent gains. The major stock indices closed in negative territory after presenting a choppy session. After Friday’s interesting day, economic data was brushed aside due to its low priority status, allowing investors to focus on recent earning reports.

McDonald’s bounced higher throughout the session after reporting an additional increase in sales. The stock closed up by over 1%, but failed to have any major impact on the indices. The S&P 500 finished mildly lower, shredding 0.33%, while the Nasdaq closed with a loss of 0.56%.

Two things have been troubling investors over the last few weeks, preventing them from driving the markets higher: From a technical point of view the major indices are now trading around psychological resistance levels, ones that have crushed recent momentum. In addition, since June the indices have presented a phenomenal rally, failing to present any major pull back. This situation is preventing additional money from joining the rally as participants are now waiting for a deeper pull back, hoping to receive more comfortable entry points.

As stated on the video briefing a reasonable pullback would be classed as one that drops to any of the Fibonacci levels:



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[zippy]

Between the end of earnings season, August doldrums and the possibility of a nice symmetry with October of last year it seems like a very good possibility. Now that we've crossed 1005.75 the inverse head and shoulders should stay intact so long as it doesn't go below the October low of around 849. Still, I'd expect some resistance around 985.

See you at 1200

[teenwolf41]

Fundamentally what can drive the market higher? We saw nice earnings from major companies and that drove the market. Now that earnings season is over, there really is not catalyst that will send the market upward. I look for a pull back here (profit taking) and then investors will get back in.

[Money123]

NYSE trading volume slumps to lowest this year
3:13p ET August 11, 2009 (MarketWatch)
NEW YORK (MarketWatch) -- A sharp drop in U.S. stock market trading volume could signal a looming test of the year's lows or merely illustrate investor inactivity in a summer month, just ahead of the Federal Reserve's policy announcement Wednesday.

The diminished trade had overall volume on the New York Stock Exchange on Monday falling to just under 1.1 billion, down 25% from its three-week moving average.

"The overall volume yesterday was the lowest for the year. I would attribute it to it being a Monday and August after earnings season, which tends to lend itself to lackluster volume in the first place, so I would be less inclined to use yesterday's volume as a tea leaf one way or the other," said Art Hogan, chief market strategist, Jefferies & Co.

Other probable factors behind the current pullback include ongoing Treasury auctions and "what may or may not be a pivotal post-Fed meeting communiqu� -- they are not going to make a decision on rates, but they may change the language," said Hogan.

On Tuesday, the major U.S. equity indexes fell for a second straight session, with financial shares pacing the losses.

After falling more than 100 points, the Dow Jones Industrial Average was more recently off 69.6 points, or 0.8%, at 9,268.35. The S&P 500 shed 10.16 points, or 1%, to 996.94, while the Nasdaq dropped 20.07 points, or 1%, to stand at 1,972.17.

But one market technician believes trading volume in recent days on the S&P 500 Index is a sign that the broad market gauge will test last month's lows, then likely fall under its March low either next month or in October.

The decline in volume started on Friday and suggests the S&P 500 will make a new low beneath its July 8 bottom of 869.32, probably next week -- on the way to a test during September or October of its March 6 intraday low of 666.79, said Tony Cherniawski, chief investment officer at the Practical Investor LLC, a financial advisory firm.

"In a normal breakout you get rising volume. In this case, we had rising volume for a while; then it really dropped off last week," said Cherniawski, who ascribes the recent rise in equities to "a huge short-covering rally."

The S&P has rallied more than 50% from its March lows, briefly slipping in late June and early July.

Friday's rise on the S&P 500 to a new yearly high was not echoed on the Nasdaq Composite Index , bringing more fodder to the bearish side, according to Cherniawski. "Whenever you have tops not confirmed by another major index, that's another sign something fishy is going on."

Other analysts offered a more benevolent take. "It's simply a case of a tired stock market," said Scott Marcouiller, senior equity-market strategist at Wells Fargo Advisors.

"It's August; the market has had a big rally in a short period of time, and it's due a time-out. We've seen the sessions get more lethargic in the past couple of weeks," he added. Listen to more