• Have a relaxing weekend. 

By Bob Byrne

It's been a long week, but one with some fantastic individual stock and index movement

I hope the markets treated everyone kindly this week.

Dougie will back at the helm on Monday.

Have a relaxing weekend.

• These include VMware, Apple, Google, Cliffs Natural Resources, and the coal and financial sectors.

By Bob Byrne

A few comments on individual names to end the week:

• VMware (VMW) -- Absolutely beautiful-looking chart that should be on every momentum trader's watch list. Be on the lookout for upside resistance near $88. A collapse under $79.75-$80 kills the current momentum.
• Apple (AAPL) -- Despite the decline over the past few days, I think Apple is still in OK shape. Look toward $443-$445 for support.
• Google (GOOG) -- A close under $880 is concerning. A close under $866 should trigger alarms. Bulls need this stock back above $903-$905.
• Cliffs Natural Resources (CLF) -- Seemingly good news out of China is all it takes to push this one a bit higher. The stock is heavily shorted, so be careful if you're shorting this one. Discipline over conviction!
• The coal sector -- Breaking higher, but still in a long-term downtrend. My preferred names in this sector to trade are Peabody Energy (BTU) and Walter Energy (WLT). As a reminder, Walter is frequently the subject of takeover chatter, and said chatter has yet to pan out. Don't place much faith in takeover rumors.
• The financial sector -- We have notable divergences in the Financial Select Sector SPDR's (XLF) relative strength and moving average convergence/divergence on a daily chart but no need to panic yet. Having said that, buyers need to recapture $20.65 ASAP.

• The market's structure remains largely unchanged.

By Bob Byrne

I know this will frustrate our bearish cabal, but I don't believe the market's structure has changed all that much this week. Could I envision a short developing over the next few days? Absolutely!

Looking solely at the market information we currently have, however, it's fair to say that we're continuing to encounter responsive behavior near 1696.50, and again in the low- to mid-1680s. So with that in mind, I believe traders should think long and hard before selling short in the hole (into the lower 1680-1687 balance) or chasing momentum toward 1696.

The current environment favors the responsive participant. So, if you fancy yourself a short-term trader, it's imperative that you remain unbiased and on an even keel. Recognize that Mr. Market is neither out to get you nor interested in throwing you a bone.

Into the close:

• Current session value is located at 1690.50, and I'm hard-pressed to imagine it shifting above 1690.75 or beneath 1689.50.
• Three-day composite value is located at 1687
• Three-day composite low-volume areas are currently 1692-1693.25 and 1684.25-1685.50.
• My guess is any end-of-day/-week shenanigans will be contained within those two low-volume areas.
• It's Friday in August -- volume and participation are on the decline as it's nearly beer-thirty.

• Easier trades can be found.

By Bob Byrne

"Genius is more often found in a cracked pot than in a whole one."

-- E.B. White

The charts of Potash (POT) and Mosaic (MOS) haven't improved (or deteriorated) all that much over the past eight days. Neither stock has advanced nor declined much beyond their July 30 intraday ranges (the day the potash companies came under extreme selling pressure).

I like to see meaningful extension (and a session close) beyond known reference points, which in this case I'd consider to be the extremes from July 30. For now, my reference points on Potash are $32 and $29. And on Mosaic I'm watching $44 and $40. No voodoo, just cut and dry range figures.

I believe an unbiased and flexible approach is warranted until the above levels are cleared in a convincing manner. What would a convincing (bullish) move look like to me? In the case of Potash, I'd like to see an upside gap that fails to retrace the entire overnight gap and proceeds to close at or very near to its session highs. Additionally, I'd want to see meaningful upside extension (on an intraday basis).

Keeping in mind that neither stock meets my own definition of cheap enough to justify being added to my investment account, short -erm traders should remain agnostic. Until evidence is presented that a more motivated participant has entered the Potash and Mosaic auction, I see no reason to adopt a steadfastly bullish or bearish posture.

• Hints of a short-term bottom.

By Bob Byrne

I know a number of traders have been stalking a bullish trade in the natural gas futures, but this is not an easy market to navigate. The contract sliced down through a meaningful uptrend line that's been in place since April 2012. And for those that find value in moving averages, it's worth noting that the previously rising 200-day simple moving average has flattened out and is in the process of rolling over.

Natural Gas Futures Volume (Four-Hour)

Source: eSignal

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All, however, is not (yet) lost for the bulls. Thursday's buying tail has provided buyers with a solid area to trade against. In my view, buyers should consider trading long against 3.28-3.30. As value migrates above 3.35, a further advance toward the 3.49-3.54 low-volume area (highlighted in red above) would seem logical.

What sends buyers back to sidelines? My guess is a few daily closes under 3.07-3.05 would kill any hopes of a second-half recovery.

To be clear, this is not an easy instrument (or market) to trade. The leverage is huge and the intraday moves can be unimaginably volatile. Simply put, the natural gas contract is a bona fide widow maker.

• I am looking to sell roughly one-third of a swing long position between $15.45 and $15.50.

By Bob Byrne

As an update to an earlier discussion on Vale (VALE) in the comments section, I am looking to sell roughly one-third of a swing long position between $15.45 and $15.50. My ultimate objective for this trade remains $17.50, and I am a buyer on pullbacks (but not on strength).

A collapse beneath $13.50 would force me out of the stock all together.

• Outlook cloudy.

By Bob Byrne

I've posted several thoughts on the chart below, but the bottom line is, I think the chart of SunPower (SPWR) is broken, and believe it needs to work its way back to $18.50.

SunPower (SPWR) -- Daily

Source: eSignal

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Only a complete reversal back above $25 changes my mind on this one.

• My take on coal and steel.

By Tim Collins

For a while now, I've been saying that I believed coal was a second-half story. It was even one of my predictions at the beginning of the year.

I will say that I had my doubts after watching the action in the first half of the year, but now, seeing a small pickup in China and the rounding bottom action on many of these stocks, I believe it holds true.

In fact, I would add steel to that group. The Cliffs Natural Resources (CLF) chart looks very strong here.

Cliffs Natural Resources (CLF)

Source: StockCharts.com

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The move higher has been very consistent as evidenced by the step-by-step move through previous resistance.

The Vale (VALE) chart is another one of beauty.

Vale (VALE)

Source: StockCharts.com

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This is the chart I've been using for trade and reference, and it now appears to be making its move toward $16.

Overall, this group might be hard for some to chase, and if you are not in, be patient.

The names look like they are buys on a pullback rather than shorts into strength.

• I've been mugged.

By Bob Byrne

Dougie recently mentioned IBM (IBM) as a favorite short idea, and I couldn't agree more. The stock has already dropped 8-10 handles in a short amount of time, and as such, is probably due to bounce a couple bucks. That being said, a weekly close under $187-$187.50 would have me looking for a significant decline.

IBM Volume (Weekly)

Source: eSignal

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What saves Big Blue? I'd need to see a weekly close above $200 to remove IBM from the penalty box.

• Coal, steel and other basic materials are in favor.

By Bob Byrne

We're seeing very strong buying right out of the gate in stocks like Walter Energy (WLT), Peabody Energy (BTU), Vale (VALE), Cliffs Natural Resources (CLF) and U.S. Steel (X).

• An argument can be made that the Es is in the process of putting in a short-term head-and-shoulders top.

By Bob Byrne

If we set aside our three- and five-minute charts and consider a slightly longer-term viewpoint, an argument can be made that the Es is in the process of putting in a short-term head-and-shoulders top. The pattern isn't perfect, but it's enough to provide bloodied bears with a glimmer of hope.

Es Volume (Four-Hour)

Source: eSignal

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Should the Es lose support near 1682.50, I'd be on the lookout for a quick drop toward 1674/1675. Continued selling beneath the mid-1670s would then be expected to trigger stops, ultimately propelling the contract toward 1655-1660 (the area of low volume shaded in red on the chart above).

What kills this pattern? Value migration and a session close above 1696.50.

• Priceline is on a mission to $1,000 -- after which traders will likely be lining up to short the name.

By Tim Collins

Wall Street has to be begging buyers to get Priceline (PCLN) to $1,000 to get the price target monkey off its back.

Here's just a sampling from StreetInsider.com:

• Aug 9, 2013 8:15 a.m. -- Priceline Price Target Raised at Cantor Fitzgerald
• Aug 9, 2013 8:11 a.m. -- Priceline Price Target Raised to $1120 at Deutsche Bank
• Aug 9, 2013 8:07 a.m. -- Priceline Price Target Taken to $1200 at Goldman Sachs
• Aug 9, 2013 7:13 a.m. -- Priceline Price Target Lifted to $1,100 at Evercore

I believe there will be lots of people lining up to short at $1,000. Good luck to you if you are. Ask yourself what your trade thesis is? What's your catalyst for a reversal? If your answer is because it is priced way too high, then tell me if a stock went from $93 to $100, would you short it? Don't let absolute price confuse you. Priceline is up 6% today, which admittedly, is a good chunk for a $46 billion company, but Priceline wasn't even overbought on a daily basis coming into today. The weekly look does have it overbought but only for a short period of time, and it is still set up bullish.

Again, I do believe there will be many traders looking to short this at $1,000, so there will be plenty of company and maybe enough today to drive the price lower. But if you are looking at anything beyond an intraday scalp, know your thesis. Better yet, make sure you have a thesis.

• Here's a quick recap of Thursday's regular session Es auction.

By Bob Byrne

Two important pieces of the market's puzzle were provided to traders during Thursday's regular session.

1. An aggressive and responsive seller was shown to be lurking at 1696.50.
2. Dip buyers remain willing to do business back inside our prior 1675-1687 balance zone. The most agreed-upon price (value) to conduct business between July 26 and the close of Thursday's session remains 1682.50 (though 1687 isn't far behind).

Es Volume (Wednesday and Thursday, Regular Session)

Source: eSignal

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Observations for Friday's regular session:

• Thursday's P-shaped volume profile (indicative of short covering) is largely ignored because the prevailing trend in the Es remains higher.
• Value migrated significantly higher between Wednesday and Thursday's close. However, as long as value remains under 1696.50, our momentum buyer is expected to remain sidelined.
• An aggressive seller is unlikely to enter the auction while value remains located above the mid-1670s.
• Responsive buyers would be expected to lurk beneath 1688.5/1689.50, within Wednesday's 1684.75-1685.25 low-volume area of rejection.
• Given Thursday's value location (1695), and the lack of any meaningful overnight news, I believe it's logical for locals and scalpers (day time frame) to begin this morning's auction with an eye toward a bullish gap fill. Failure to reject 1684.75 and build value above 1688.5/1689.5 puts Thursday's buyer at very serious risk.

• Here's a peek.

By Bob Byrne

The rundown:

• Emini S&P futures are down 5.5 handles.
• Emini DJIA futures are down 45 handles.
• Emini Nasdaq futures down 4.25 handles.
• Nikkei 225 (dollar) futures are down 65 points.
• Europe is mixed, with the FTSE trading moderately higher, and the DAX and CAC trading lower by 0.1 to 0.2%.
• Gold is flat.
• Silver is up 0.25%.
• Dr. Copper is higher by 0.41%.
• Crude is roughly $0.50 higher in overnight trading, though it was higher by more than $1.20 only an hour ago.
• Natural gas is 0.24% higher. Wholesale trade -- this is generally not a market-moving release.

Economic Events for Friday's session:

• I am anxious to see the front-month gold futures contract break out of it recent consolidation.

By Bob Byrne

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

-- Alan Greenspan

Being an avid short-term trader of both the SPDR Gold Trust (GLD) and the Direxion Daily Gold Miners Bull 3X Shares (NUGT), I am anxious to see the front-month gold futures contract break out of it recent consolidation.

Gold Futures Continuous Contract Volume (Four-Hour)

Source: eSignal

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The gold futures contract has done nothing but drip lower since its break above 1300 on July 22. Based on Thursday's strong performance, however, as long as buyers remain active above 1304-1306, I believe the bulls have a real shot at shifting value above 1316 and making another run at 1348-1350. A close above 1348-1350 would have me looking for a test of 1367 and 1385-1387 in the not-too-distant future.

Should Thursday's buyer abandon the auction and the gold futures contract close beneath 1304-1306, the odds would favor continued churning between the mid-1280s and 1300. As composite value (currently located at 1284/1285) is lost on a closing basis, I'd expect a more motivated seller to enter the auction and begin pressing his bearish bets toward 1255/1250 and 1222.