Fear declined if you are using the VIX volatility index as a gage to the markets "fear factor"as it reached a five-year low this week. It is really a measure of the markets expected volatility over the next shorter term,  maybe three or four weeks. Some suggest such a low reading indicates a pending top in the market as it shows how complacent people are regardless of the poor economic news. In the shorter term actually a low VIX can be bullish as while there is less worry there can be more reason to buy stocks. Decisions from the ECB or the Federal Reserve or some geopolitical disturbances could quickly change this situation. This past week was quite constructive and after many days of rather boring market index indices they put in an NR7 candle on Wednesday which led to the technical breakout on Thursday. The small caps had a super three day rally but overall they are still underperforming and need to continue the game of catch-up if we are really going to see a breakout. A top does not look nearby but until we can get some upside confirmation from the small caps a top could be forming. Our watch list stocks have been doing very well with new ones each day and many old ones continuing to mvoe higher. We have two more full weeks of trading before the Labor Day holiday so expect very low volume during this period.

Before we get to the charts - some entertainment.

John Williams  has composed some of the most recognizable film scores in the history of motion pictures, including Star Wars, Jaws, Superman, Indiana Jones, E.T., Hook, Jurassic Park, Schindler's List, War Horse, Home Alone and the first three Harry Potter films. In 1985, Williams was commissioned by NBC to compose a television news music package for various network news spots. The package, which Williams named "The Mission", consists of four movements, two of which are still used heavily by NBC today for The Today Show, NBC Nightly News, and Meet the Press. In today's video NBC"s Lester Holt looks at John Williams legendary musical accomplishments and tells the story of how, in 2004, the Theme to NBC Nightly News was Digitally re-recorded 20 years after the original was tracked. This piece was broadcast on MSNBC the week the new music premiered.  Wikipedia on John Williams.  The main music begins at 4:45 into the video - an excelent 99 piece orchastra as well, this music has such emotion. 

Austalia's Network 7 uses The Mission as well but they made a club mix out of it. Seven News  Pretty sweet.

Initial claims for U.S. unemployment insurance came in slightly higher than anticipated in the week ended August 11th, according to a report released by the Labor Department, although claims appear to have stabilized following recent volatility. The report showed that initial jobless claims crept up to 366,000 from the previous week's revised figure of 364,000. Economists had expected jobless claims to climb to 365,000 from the 361,000 originally reported for the previous week. At the same time, the less volatile four-week moving average edged down to 363,750 from the previous week's revised average of 369,250.                       graphs - RTTNews

The incipient rebound in the housing market may be good for the economy as a whole, but it’s not good for the average American looking to buy a new home. Almost 74 percent of all new and existing homes sold in the United States during the second quarter were affordable for families with the median national income of $65,000, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index. That may sound pretty good, but it’s down from 77.5 percent in the second quarter.  Median home prices gained in 92 percent of the markets polled during the second quarter, while median income was unchanged.

New housing construction in the U.S. dipped more than expected in July, but an equally unexpected strong jump in construction permitting offers hopes for the future of the beleaguered housing market.New privately-owned housing starts came in at a seasonally adjusted annual rate of 746,000, a 1.1 percent drop from June levels. Most economists had predicted a drop in housing starts from the rebound in June, but most had expected it to remain at a somewhat higher 750,000 annual.The June rebound also proved to be somewhat less strong than initially reported. Preliminary figures had put the June rate of housing starts at 760,000.However, new building permits, often viewed as an indicator of future housing starts, jumped significantly in July, rising 6.8 percent to a seasonally adjusted annual rate of 812,000 - the highest level since August 2008. 

The June trade deficit shrank to $42.9 billion from the revised $48.0 billion in May andthe drop was much larger than most analysts had predicted. June exports increased $1.7 billion from May to $185.0 billion. Imports were $227.9 billion, a decrease of $3.5 billion from May. The U.S. trade deficit in June was the smallest in 1-1/2 years suggesting an upward revision to second-quarter growth.

The New York Fed said its general business conditions index dropped to a negative 5.9 in August from a positive 7.4 in July, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to show a much more modest decrease to a positive 7.0. 

The Empire State Manufacturing Survey (manufacturing in New York State) in August 2012 shows manufacturing contraction after eight months of expansion. Manufacturing expansion is indicated by positive numbers in this index. This noisy index has moved from 20.2 (March) to 6.6 (April) to 17.1 (May) to a barely positive 2.3 (June) to a marginally better 7.4 in July – and now a -5.9. 

For some perspective on one of the more important global stock markets, today's chart focuses on Chinese stocks and presents the current trend of the iShares FTSE/Xinhua China 25 Index (FXI). As today's chart illustrates, Chinese stocks have endured what amounts to an extremely wild ride since 2005. The FXI trended upward at an ever accelerating rate (i.e. parabolic) from 2005 to Q4 2007. As the credit bubble began to unravel, so too did Chinese stocks with the FXI trending downward at an ever accelerating rate from Q4 2007 to Q4 2008. Beginning in Q4 2008, the FXI surged -- gaining over 155% trough to peak. Since that post-financial crisis peak back in Q4 2010, Chinese stocks initially treaded water but more recently have embarked on a steep downtrend. More recently, Chinese stocks did rally but just turned back down after hitting resistance (see red line). Considering China's significant contribution to the global economy, this recent stock market action is most definitely a red flag.

This past week's  sectors.

This past week's indices  - 

On the monthly chart we see that the Dow closed at a multi-year high while the S&P 500 was very close to its high of the year. The NASDAQ gained the most for the week and while the Russell did a good job this week it is off its high from both 2011 and 2012. Oil  closed just under the Ctr., Bollinger band so an interesting point as it is resistance while gold remains flat for the month.

On the 60 min. chart you see how tight the Bollinger bands were for several days and we pointed out from the daily charts that the Dow and S&P 500 had  NR7 candles, meaning the narrowest range out of the past seven days, and this led to the rally on Thursday. While most majors stayed more or less flat on Friday the small caps Russell kept moving up closing at the high of the day

The weekly Dow shows it  closed right at resistance but not yet at the top Bollinger bands. It could break right through or may have to go sideways a while or dip. It is unlikely to put in a top right here as there is no signs that this  move upward is weakening though it is on fairly light August volume.

This daily long term view shows the intraday highs that have yet to be tested.

The 10 min. mechanical chart shows the tight consolidation on Wednesday, on the left, followed by Thursday's solid advance and Friday's consolidation one more time. 

The Dow futures  closed to make a new high of the year so is above the zero line, which puts its odds well above 50% that the Fibonacci 127.2% will be reached at 13,570

This shorter timeframe Dow futures shows the extension on Thursday out of the tight range it had been in. 

The NASDAQ summation index with this week's move expanded the space between the index and the five day EMA which is bullish. 

Finally, we did see the moving average of number of new highs on the NASDAQ move back up just slightly over this red resistance line. 

Here the second of two weeks of nice gains from the NASDAQ.  - Actually 5 weeks of green candles.

On the 60 min. NASDAQ chart we show here a Fibonacci projection based on the highs and lows from July giving resistance now at 3084. 

The NASDAQ 100 futures very close to testing it's high the year. 

The NASDAQ 100 ETF shifted back to buy in late July and with no whipsaws captured the significant gain since then. 

The OLD  is the ultra for the Qs and this cross over buy came on August 13 before the horizontal breakout.

We had shown this Priceline chart previously as it had gone down to test the 61.8% retracement level which was also horizontal support. So far it has had an understandable bounce running up almost to the 50% retracement level.. This may have to revisit those lows and by the time that happens the lower trendline may be higher, and at a point where it is touched. If so that would be another tactical buy point with stops just under.

As major indices are near multiyear highs the volatility index is at multi-year lows. 

The NYSE has further to go to get to its high of the year and we have yet to see  upside movement in the number of new highs minus new lows. 

There is also no big change in the percentage of stocks on the NYSE now trading over their 50 day moving average. That percent is now 78. 

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The weekly S&P 500 showing just points away from besting the high of the year.

Except for the last week of December, this time of the year has the lowest volume so it could just easily continue an upward movement through this resistance. If there is some shock to the market, like from outside news however, the market could also drop quickly. At the moment, the S&P 500 has some distance above its 20 day moving average. Note that the RSI is not yet in overbought territory.

The 15 min. chart shows that after this initial break on Wednesday it pulled back testing the top of the it trendline and that was the low just prior to the extended rally.

The daily S&P 500 futures slichtly closing over the zero line so better than even odds of getting to the 1456 level and the 127.2% Fibonacci projection.

The movement at the end of the week also took the S&P 500 futures above the top of this parallel channel and over our shorter-term Fibonacci 161.8% projection target.

Some use the SPY and after our June pullback to the 38.2% retracement level it has now closed just at the high of the year.

The ultra long for the S&P 500 last had the buy signal the first week of August and continues in this ascending parallel channel. Even if the averages had not crossed one would not like to hold short term on any move under the red moving average.

We had been concerned that the small caps were noticeably underperforming the large ones and though that is still a concern, the last three days were big ones for the Russell 2000. It is now facing resistance at 830 so at the moment it is just barely above the top Bollinger band..

Towards the first part of August we had the trendline break to the upside on this short term Russell chart and here you see the move to the horizontal resistance.

The 3-X ETF for the Russell 2000 with of course it's similar look closing on Friday back above this 61.8% retracement toward the March highs.

As longer-term interest rates are creeping up the 30 year bond price has been declining but now closed at some possible support. This is also near the 200 day EM a and a bit lower  a trendline, which started July of 2011. If it goes a bit lower RS I will also dip once again under 30 and this an important level to watch as last time it made a significant move from there.

The banking index on this longer-term chart getting closer to the top trendline of this triangle.

After going flat for many days the last couple of days have been good for the banking index.

Some good reports from the retail sector helped the retail ETF continue higher this week.

The Dow Jones world market gained an additional .76% this week and is now closing in on the top trendline of this triangle.

The FTSE consolidated this week after a two-week bounce from the 50 week EMA.

The Canadian venture exchange had been  declining since spring but has now had its RSI make a second attempt for a move over 30 doing it successfully and putting in a 3.5% gain for the week.

Rather remarkable that we have seen such a strong US market and world markets in general while the Shanghai exchange has been declining. This is such an important and economy that at some point, if this weakness continues it will be reflected in our own markets.

Even with the expected slowdown in the Chinese markets, the commodities continued to rise with this ETF adding 1.7% this week and heading into resistance at the 200 week EM a at 34.60.

Oil gained 2.5% this week closing back above these weekly moving averages.

On this closer view of the weekly we see that close above the 50 week EMA.

Oil futures have closed now above the 50% retracement towards the high of just over 112.

Natural gas continued lower by 1.9% getting closer to its 20 week moving average at $2.55.

The natural gas ETF UNG so far has declined about the same amount as it did after it's first rally this spring. These Fibonacci retrace levels are shown.

For the week gold was virtually flat just pennies below its 50 week EMA.

Gold futures as we saw it last week, but such minor changes.

The gold miners ETF did add 1% for the week and closing over the 50 week EMA.

Our mechanical gold miners continues on a buy.

Silver has been in a very tight range not very interesting except for very small scalping.

Copper remains under all its moving averages but above this triangular trendline.

The euro had a consolidating week and this could actually form a small bull flag.

Here the euro futures showing the tight range this past week.

That tight range extended to the US dollar as well and for the month it is down 0.05%.

And the daily view of the dollar futures.

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Check the updated Earnings Calendar on all overnight holds.

This week's economic calendar for the USA.