MARKET AVERAGES SHOW NO TREND CHANGES -- AUGUST TRADING RANGE IS STILL INTACT -- FALLING OIL IS HELPING TO STABILIZE MARKET

DOW DIAMONDS BOUNCE OFF 50-DAY LINE ... Little has happened to the major market averages since my Monday message. Chart 1 shows the Dow Diamonds bouncing off their 50-day average again. That's usually the first line of important support during a pullback or consolidation. The daily MACD histogram bars along the bottom of the chart haven't changed either. They're still negative. That makes for a neutral short-term chart picture. There is a more negative factor and that's recent market volume. In all of the major indexes shown below, downside volume has been noticeably heavier than upside volume during August. That's not the kind of pattern we normally see in a rising market.

Chart 1

S&P 500 SPDRS STILL HOLD 122 SUPPORT ... On Monday I wrote about the importance of the 122 support level for the S&P 500 SPDRs (SPY). That was mainly because that level represented a test of the early March peak. Chart 2 shows, however, that 122 also represents a test of the 50-day moving average. So far, both have held. Unfortunately, the volume pattern hasn't been as encouraging. The two biggest volume days over the last week have been to the downside. That doesn't inspire a lot of confidence. Nor does the fact that the 12-day Rate of Change (ROC) is still trading below zero. [The ROC is a short-term oscillator that measures price changes over the last 12 days. It can be used to find overbought and oversold levels. But a crossing above the zero line is needed to give a short-term positive reading].

Chart 2

NASDAQ 100 SHARES ARE OVERSOLD ... The daily chart of the Nasdaq 100 Shares (QQQQ) hasn't changed much either since Monday. The recent pullback is nearing a test of the early June peak at 38.64. That's the first line of chart support. Here again, downside volume (red bars) has been heavier than upside volume (green bars). Today's price bounce came on lighter volume than yesterday's price drop. The two lines lines at the bottom of the price chart may carry some good short-term news. Bollinger band width is trying to turn up from oversold territory near 1. The bottom line (%B) plots the QQQQ relative to its Bollinger bands (which are the upper and lower horizontal lines). The %B shows that the QQQQ is bouncing off its lower band. That's not enough by itself to launch a new upleg. But it may be enough to keep the Nasdaq, and the rest of the market, in an August trading range. As I also suggested on Monday, this week's selling of energy shares (and falling crude oil) may provide some short-term stability during the dangerous month of August.

Chart 3