Flash PMIs Could Be A Problem In 1 Week – Market Will Tread Water Until Then

This week we can expect choppy trading near the low end of the range. Traders typically take time off in August and the volume will be light. The next major news event is a week from today (flash PMI's) and earnings season is winding down. Buyers are nibbling at the 200-day moving average, but the bid is small. Asset Managers are not anxious to buy ahead of the September FOMC and one whiff of bad news will prompt them to pull bids. Japan's GDP fell 1.6% quarter over quarter. China is struggling to tread water and traders are wondering if the PBOC's Yuan devaluation is a warning sign and next week’s flash PMIs could be problematic. Europe is growing at a meager .3%. Trillions of dollars in fiscal spending and monetary easing have not resulted in economic growth. These news events used to spark big rallies and now they don't. August is a seasonally weak month and I expect to see the long-awaited 10% correction sometime in the next 6 weeks. Prices are wound tightly and we are likely to see a swift drop and a capitulation low. Once we bottom, a buying opportunity will present itself and we will rebound into year-end. I will focus on day trading this week. As long as the 200-Day MA holds, I will stick to the strategy. If I see a pattern of late day selling and if we break major support levels (SPY $207.60, $206 and $204.40) I will buy puts. Look for quiet trading this week. Keep your size small and watch for possible selling late in the day. . .

Daily Bulletin Continues...