Weekly Wrap Up, July 11 - July 15 2011

Economy: Retail Sales report suggesting future consumer strength

The pace of change of real retail sales has started to slightly accelerate from between the green horizontal lines, a turn that usually suggests the series will rise in the near future.

S&P500: The market looks prone to play the range-bound theme

As the weekly SPX chart above shows, the initial powerful thrust upwards (green ellipse) has not had follow through (red ellipse). Since breadth has been weak lately and since it stayed weak, as the TRIN 13 day ema suggests, the market will most probably retrace towards the bottom of the range shown above.

Looking Forward

Next week will be marked by an ongoing earnings season, ongoing negotiations over the debt ceiling, by housing data and by a big EU summit on Greece. I think the market will anticipate/react to most of these events by falling. Only the EU summit may induce some upside for the market as it will probably try to anticipate a positive outcome.

Trading

I will be looking for short-term short entries on Monday or Tuesday. Although there were some good pull backs last week, I deferred shorting as I expected the incoming economic data and Ben Bernanke's testimony to represent reasons for a multiday pull-back.

As the market fell this last week, it seems that smaller pull-backs were 10 points long and a larger pull-back was 20 points long. At Friday's close, the market had already retraced 10 points from the intraday low on Thursday.