It seems the market is adjusting to the high potential on Friday morning for a significant revision to second quarter U.S. GDP. The consensus forecast appears to be a revision from 2.4% to 1.4% with a “whisper” number as low as 1.0% “anecdotally” based on watching and reading various bearish pundits. Since failing to break the important resistance of the June highs, the S&P 500 has sold off 8% in less than 2 weeks. The selling only took a brief pause for a weak challenge of overhead resistance at the 50-day moving average. This break from the downward pressure occurred after selling volume languished. Two straight days of sharp selling into the close was a strong tell the rally could be very short-lived.
In the last 2 days, volume has finally perked up a bit as both sellers and buyers seem to be waking up, contrary to expectations for waning volume into the Labor Day weekend. The action is tentative, but it suggests to me that the July lows will hold for the remaining days of summer trading. A very sharp GDP adjustment might be one catalyst strong enough to break the July lows on the major indices. Of course, any upside surprise, even hitting the cautious expectation of 1.4% growth, should ignite another relief rally.
The chart below summarizes the action. (Also note how the index is tagging and breaking below its lower Bollinger Band. Since the sell-off began in May such action has soon led to relief rallies).
*Chart created using TeleChart: 
So, in the end it looks like the summer will indeed up caught in a trading range, just a wider one than I expected. Bears and bulls will have a lot to prove once trading volume (supposedly) picks up after the Labor Day holiday – will support or resistance break first?
Be careful out there!
Full disclosure: long SSO puts