Frozen

Friday was month end and just as Fridays like to set record highs in a bull run so too does month end.

 However, this record high comes after 7 days with the SPX frozen at our 2174 square-out.

 Who would have ever thought the SPX/SPY would carve out an historic flat after this thrust off the late June low?

 Who is willing to chase another breakout without the benefit of a check back or pullback?

 With the market shrugging off geopolitical strife, violence, election uncertainty and a lousy GDP perhaps this is a textbook wall of worry.

Be that as it may, August is traditionally a weak month.

When the SPX gains more than 3% in July going back 20 years, it has dropped in August 4 out of 5 times—from as little as -1% to as much as nearly 6%.

 A 6% setback from here ties to the June 16 low at around 2050.

That’s the pre-Brexit swing low the low of which got everyone bearish and pulled back the rubber band.

The above hourly SPY shows the breakout over 210 from a Stein & Handle pattern.

Theoretically a backtest of 210 maintains a bullish structure but weakness from here should be a big sell signal as the current Slim Jim suggests scale up selling on rally attempts with AMZN and GOOG keeping the market afloat.

We should either fail big from here or slice through this level to 2220ish.

Dollar weakness late last week saw gold and the miners rally with GDXJ running from the 45 strike to the 50 strike.

Remember that 49-50 is a key square-out level in GDXJ so it too should either explode further or this is a test of prior highs with a pullback on the table.

Dollar weakness also elicited a rally attempt in oil following a test of its 200 day line as shown last week.

Although the rally was nothing to write home about, many energy names were so compressed they saw nice bounces.

CLR still looks suspect.

Conclusion.

With the SPX frozen at a square-out and earnings suspect on the heels of a horrible GDP going into a traditionally weak period UNLESS there a blow-off is the agenda, caution is warranted.

It doesn’t look like this is on the tape, but it should be easy to see if it happens. If so the market will also defy the weak August stats.

If momentum shows up in August it would likely run into month end defining a major buying climax which could melt very quickly.