Today's Technical Outlook- 7/31/2013

Market Summary

David Chojnacki S1F Market Technician

After moving up briefly at the open, the indices began a slow move to the downside. A good housing price number could not salvage the averages as investors focused on weak revenue numbers in earnings announcements. The Nadaq100 was able to remain positive and hold a moderate gain into the close. The DJIA and S&P were mixed and barely changed. At the close, the DJIA slipped 1.3 points, the S&P added just 0.63 points, and the Nasdaq100 was up 0.5%. Breadth was slightly negative, on below average volume. RSI's were nearly flat in the session, with the Nasdaq100 moving up a couple points. ROC(10)'s were mixed, with the DJIA and S&P declining, while the Nasdaq100 moved back into positive territory. The DJIA and S&P have now traded in a narrow range for the last 10 sessions, developing a 'bull handle'. The S&P had its MACD cross below signal, while the DJIA and Nasdaq100 are fast approaching. The S&P has traded between 1672 and 1698 for the last 13 sessions. A break out of this range will determine the short term direction. The Nasdaq100 has been recovering from some prior weakness and received some additional strength in the session from a stronger AAPL. The VIX was flat in the session, remaining at 13.39. The S&P near term support remains at 1675 and 1662-63. 1675 is critical near term support and a break below could be the start of some short term weakness. Upside resistance is at 1688 and 1700. The Nasdaq100 now has near term support at 3075 and 3050. Look for near term resistance at 3088-90 and 3100. Economic calendar is full today(see above). Europe is mixed in early trading. Futures are slightly higher versus fair value in the pre-market.

Major Economic Reports Today

ADP Employment-8:15am GDP-8:30am Chain Deflator-8:30am Emp. Cost Index-8:30am Chicago PMI-9:45am Crude Inv.-10:30am FOMC Rate Decision-2:00pm

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ETFs can lead to unexpected results over the long term. As a result, we believe longer-term investors should consider regularly rebalancing positions. 4) Trendless markets, particularly those with a high level of volatility, can lead to substantial relative underperformance of L&LI ETFs. 2) Leveraged and Leveraged Inverse (L&LI) ETFs typically utilize futures and equity swap agreements. The use of these derivative instruments increases risk and enhances the possibility of tracking error.

Relative to traditional ETFs, leveraged, inverse and leveraged inverse ETFs typically have higher costs and lower tax efficiency. 3) The effects of compounding can lead to significant deviations from traditional benchmarks over longer time periods. For example, if $100,000 is invested in an index that increases in value by 10% on day one and then decreases in value by 10% on day two, the investment will be worth $110,000 at the end of day one and $99,000 after day two. However, the value of a security that doubles the daily performance of the index would be worth $120,000 on day one and $96,000 after day two. Thus, the index is down 1% after two days, a doubling of which would be down 2%. However, the security attempting to double the return of the index is down 4%. Investors should consider carefully the potential impact over longer periods. MLP and MLP ETF Risks Individual MLPs are publicly traded partnerships that have unique risks related to their structure. These include, but are not limited to, their reliance on the capital markets to fund growth, adverse ruling on the current tax treatment of distributions (typically mostly tax deferred), and commodity volume risk.

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