First of all I wanna mention in the last weekend outlook I said it was very possible we could see a light trading session into holidays – and it turned out pretty correct – markets did not move either UP or DOWN for the whole week – just choppy all week long , very boring….

Ok – but lets move on to the view of the markets for this week. There is first of all some real good possibility we finally will see some market action again , for this Tuesday I dont expect much , as usually the day after holiday is also light. So the US is closed Monday and Tuesday is usually a light trading session , so as of Wednesday I think the action in the markets will begin , now the question is , if it will be to the upside or downside?

Lets take a look at some stuff.

1. VIX weekly chart is having a bullish MACD divergence , all the time VIX had this , markets did nearly always have a bigger sell off coming up , VIX hit the major trendline support from all other “major tops” in markets and I think the 1426 is no different – so very good chances VIX can spike higher

2. USUALLY the day after labour day is bullish , so Tuesday could be up according to statistics – but that does not mean it will be up big , can also be up 0.1-0.5%

3. Dollar has been weak over the past 1 month – this has helped markets grinding higher – dollar hit some MAJOR support area trendline on Friday and made a red hollow candlestick – both of this tells me that it is VERY likely that the dollar has bottomed and if so – then markets will start to sell off as soon dollar increases. Long positions in EUR is record high now , and this is a bad sign for euro – I think Draghi could dissapoint this week.

4. Long term charts remains extreme ugly with a topping head and shoulders pattern still intact , tells me still that a MAJOR decline in markets is coming – but as we try to trade the shorter timeframe we focus more on this , but the long term is still extreme ugly and I believe we are still in a bear market which will not end before 2014-2015.

5. Another good indicator is looking at how Fridays ends , why ? You see if there is much panic in markets and people are “WORRIED” holding over a weekend , then most likely the Fridays ending red as people is taking money out of market over a weekend , as the risk holding over weekend is too high for some news coming out. If markets ends green on Fridays it tells you that people are NOT worried holding over a long weekend and this is USUALLY seen near market tops – so the conclusion is if you see many GREEN Fridays like in past weeks , then most likely near a top, and if you see many RED Fridays in a row, then most likely near a market bottom as people dont wanna hold over weekend( less bulls, many shorts) and opposite now with many bulls not many shorts.

Conclusion: All in all – EXPECT some big movements in markets coming in soon , probably after Tuesday this week. Tuesday is by STATISTICS a bullish day , so we might end green first in the week, but as we move closer to Draghi ECB this week I think he will dissapoint and markets could see a SHARP move down as the dollar looks ready to blast higher. Target for SPX is 1370 near term and NYA 7800 – I believe that SPX topped at 1426 , all other indexes remains below 2012 highs only SPX made a higher high. I remain fully short and plan is to hold shorts as long we remain below 1426 on SPX as I see this pretty clear topping pattern. REMEMBER – a top in the markets is also a process and not just a one day event – you see markets has been holding up here for several weeks but most likely its a topping pattern.

Bullish sentiment is now a lot higher than in June – lots of bulls now and this is what we need for markets to take another big move down. Remember the banks and big funds running the show – ignore the news ,read the charts – we can always go up on “hope” and then we will go down on “fear” , the headlines is a lagging indicator and not useful. So especially with the dollar in the position where it is , I think it is not very very likely dollar starts to increase and this will set a pressure on markets.