The week ahead 08-08-2011

We have had a lot of volatility which has spiked the VIX (volatility index).  Friday after the close S&P downgraded US debt.  I suppose this could cause volatility to continue, but I suspect that the markets have already discounted this move by S&P.  So I am expecting a reduction in volatility next week as the market settles into a trading range for the week.

Best guess is the range will be no more than 50 points on the S&P.  If I am wrong about decreased volatility then the range could be a lot more. The first half of the week I expect we see an attempt to rally the market.  The 34TD cycle should be up.  I also believe the 20 week (Wall ) cycle bottomed and should turn up.  But the 20 week cycle has a longer turning radius so I suspect it needs some time to build upward momentum.  The 22TD cycle is down and should build to maximum down side momentum by the end of the week.  So by mid week I would expect we see the market to start giving back any gains it makes in the first part of the week. 

By the end of the week we should be fairly flat for the week  (+/- 10 S&P points for the week).  During the week we may rally to around 1228 (FIB level).  It may test this weeks lows but I think the 1175 level is more likely (FIB 1177.43).

Here is a chart of the SPX showing calculations based on cycle amplitudes:

GL traders.  Do your own analysis.  Very tricky market to try and trade, so be careful.