Weekly Watchlist 7/20

After last week's impressive rally we can pretty much come into this week with an upside bias. However, at the same time, you must remember that 700 Dow points in one week is quite a run. The market is definitely due for a breather this week, whether that means just a sideways consolidation or perhaps a shallow retracement. It is also the first week of a 5-week August options cycle meaning that unlike most months where there are 4 weeks between each options expy week; this month we have 5 weeks. This usually results in some downside pressure during the first week of the cycle as buyers come in for put protection and market makers (who sell the puts) must short futures or common to hedge themselves.

Technically, the SPX is still stuck in the 875-950 range that has been in control since early May. Summertime is known for being fairly rangebound as markets are quieter (except last summer of course). I actually think the SPX can continue to gyrate within this range until Labor Day, which is about 6 weeks away. Of course anything can happen but if the market can stay in the current range for the last 2 months, what's another 6 weeks?

Like I said, short term I would expect a pullback and even would not be surprised to see that gap from last week filled soon. Another thing I noticed is that last week's candlestick, as pictured in the chart above, regained all of the previous 4 weeks of losses and brought the SPX back to 940. That is bull market price action. Time is just as important as price when it comes to technical analysis. Also, the retracement from June came down and bounced almost exactly off the uptrending 20 week sma and then closed just above the 50 week sma.

The watchlist:

Longs>>> CVD, BWLD, ANR, MCD, MVIS, JCP, NDN, UXG

Shorts>>> FWLT, ADSK, MLM, DE, ANF