The Dow Jones Industrial Average (NYSEARCA:DIA) and S&P 500 (NYSEARCA:SPY) fell on Friday, along with other major global stock indexes, to post their worst monthly performance in over a year.
The Dow Jones Industrial Average (NYSEARCA:DIA) fell 0.2% on Friday, leaving it down 1.3% for the week and -4.5% for August.
The S&P 500 (NYSEARCA:SPY) declined 3% in August while the Nasdaq Composite (NYSEARCA:QQQ) shed 1% over the last month.
The Russell 2000 small cap index (NYSEARCA:IWM) slumped 3.3% over its close on July 31st.
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On My Stock Market Radar
The Dow Jones Industrial Average (NYSEARCA:DIA) and other major global stock indexes were buffeted last week by the ongoing drama over potential military action against Syria. Other forces at work were mixed economic reports, concern over the upcoming Federal Reserve meeting and the future of quantitative easing, and the ongoing economic slowdown in Europe and the emerging markets.
On a technical basis, the Dow Jones Industrial Average (NYSEARCA:DIA) suffered major damage during the month as outlined on the chart below:
chart courtesy of StockCharts.com
In the chart above, we can see how the Dow Jones Industrial Average (NYSEARCA:DIA) broke down on August 15th and has already sunk below its initial price objective of 15,000.
Next support lies at the 14,500-14,600 level, and a break below the blue bullish support line at 14,500 would indicate the onset of a new bear market according to point and figure charting.
In conventional charting, the 200 day moving average is the demarcation line between bull and bear markets and it currently resides at 14,434, 2.6% below Friday’s closing level.
Similar action is seen on the S&P 500 (NYSEARCA:SPY) where the index is below its 50 day moving average and at significant support levels.
Both indexes are approaching oversold levels and so a short term bounce would not be unexpected, however, confirmed resumption of a new uptrend would require gains of approximately 5% from current levels.
Finally, the NYSE Bullish % Index which measures the entire universe of NYSE stocks has registered a bear market confirmation as a result of August’s decline.
chart courtesy of StockCharts.Com
Stock Market News You Can Really Use
Last week’s economic reports were light and mixed as market participants enjoyed the last week of summer on a low volume trading week.
July Durable Goods Orders fell a shocking 7.3% compared to last month’s +3.9%, pending home sales for July declined, most likely in response to higher interest rates, and weekly jobless claims came in higher than expected.
Good news was found in the upward revision to Q2 GDP to 2.5% and gains in consumer spending, income and confidence, along with an improved Chicago PMI report compared to the previous reading.
The upcoming week will bring an economic data storm along with the sure to be escalating debate over potential military action in Syria.
Tuesday: August Markit PMI, August ISM, July constructions spending
Wednesday: August car sales, Fed Beige Book
Thursday: ADP Employment Report, weekly jobless claims, July factory orders
Friday: August Non Farm Payrolls, August Unemployment report
Friday’s employment reports will be pivotal as they will be the last major data points for the Federal Reserve before its meeting Sept. 17-18 at which many analysts are expecting the beginning of the end of quantitative easing. This meeting will be particularly closely watched as Dr. Bernanke is scheduled to give his press conference at the close of the session.
This Tuesday will also find President Obama in St. Petersburg, Russia, for the G-20 meeting, and this could be interesting as he and Russian President Vladimir Putin stand on opposite sides of the Syrian conflict.
Federal Reserve Presidents will also be on the stump with San Francisco Fed President John Williams speaking on Wednesday and Chicago Fed President Charles Evans and Kansas City Fed President Esther George slated for Friday.
Bottom line: September is an historically weak month for the Dow Jones Industrial Average (NYSEARCA:DIA) and so fundamental, technical and seasonal factors are sure to be in play, along with uncertainty over Syria and any potential action, inaction or surprises from the Federal Reserve.
Wall Street Sector Selector remains in "red flag" status, positioned in inverse ETFs and precious metals and expecting lower stock prices and more volatility ahead.
I hope that you're having a wonderful Holiday weekend as summer draws to a close. We were in our R.V. last week up in the high Cascades just north of Crater Lake and had a great time. Crater Lake is the deepest lake in the United States and 9th deepest in the world and was formed when Mt. Mazama blew up some 7000 years ago. 
September 1, 2013 
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