A number of the indices reviewed had a sharp downside reversal last week, which we consider a cautious flag to the advance. We remain cautious the Russell 2000 and Mid-Cap (MDY) and continue to suggest reducing exposure. We are on alert for both the S&P 500 and Nasdaq Composite as these indices approach their near-term support zones. The ratio chart of MTUM vs. SPLV reversed hard from our MOB target level, and we expect more weakness for MTUM. We remain short the TLT.

The uptrends for both the S&P 500 and Nasdaq Composite remain intact but approaching target zones where we will be looking for a pause or pullback. We are concerned with the loss of upside momentum for the Russell 2000 and Mid-Cap (MDY) after coming into an area of resistance and target levels. We would be reducing exposure to both those segments of the market. The ration chart of the Momentum Factor (MTUM) ETF vs. The S&P 500 Low Volatility ETF has achieved the MOB target highlighted on August 18. We are taking partial profit right here. Lastly, we remain short the TLT and would be adding on short-term strength.

The S&P 500 continues to pause at our MFU-3 target area, and we are on alert for either a push to new highs or a near-term pullback.  The pullback buy we noted last week for the Nasdaq Composite has worked out nicely. The index is getting close to our MFU-4 target of 11350.

The most important thing we would mention here is that the S&P 500 is into our MFU-3 target area of 3360 and a zone where we would expect a pause or maybe a short-term pullback.  The Dow Transports have achieved our upside target at 11200, and we would be taking partial profits right here.  There is risk of a pullback from this zone.  We highlight the U.S. Dollar Index (DXY) on page 9.  We believe the dollar has bottomed, and we expect to see it move higher from here.

Uptrends remain firmly in place for most of the indices reviewed, with the exception being the Dow Utilities.  The S&P 500 is getting close to our MFU-3 target area which coincides with the February highs of this year.  We may see a pause in the advance into that area.  Upside momentum continues to expand for the Nasdaq Composite, and we highlight the Software group as an area to add exposure.

Trends for the S&P 500 and Nasdaq Composite remain favorable and we continue to see improvement in the Russell 2000 and Mid-Cap (MDY).  We also highlight three of our top scoring sectors based on our model.

Improving upside momentum has both the S&P and Nasdaq Composite ready for another leg higher. The small and midcaps have been in a tight range in recent days, and closing above their 200-day averages would be positive. Biotech recently broke out of a consolidation pattern and poised for another leg higher. We would be adding to this group. The iShares Tech-Software ETF (IGV) had a sharp reversal from support and looks to go a lot higher. We highlight nine stocks that screen well and would be adding to.

Large caps continue to forge ahead with the S&P 500 outperforming both mid and small caps. We don't see any distribution in the Nasdaq Composite, but we do have an overbought reading with momentum nonconfirmation.

Last week, both the S&P 500 and Nasdaq Composite had a strong rally off support with the Nasdaq finally coming into the upper end of its channel and MOB target zone. We don’t have any divergence at this time, so all we can say is that this is a zone for a pause for the NASDAQ.

Last week's pullback had a number of indices holding regression channel support areas and have now turned up. We believe the bias is to the upside and would pay close attention to the small and mid-cap area.

Last week's orderly pullback has provided an opportunity to add to long exposure. We like the setup in the S&P 500 Emini on the long side. The Mid-Cap (MDY) reversed off its regression trend channel and looks poised to move higher. Within HealthCare, we suggest looking at the biotech group on the long side. Both the IBB and XBI are at new all-time highs.

All the indices reviewed rallied sharply off their respective regression trend channels and look to have more upside. We highlight the Financials ETF (XLF) and WTI Crude Oil as well.

Upside momentum is expanding with small and mid-caps catching up to the large caps. Technology looks like it is turning back up relative to value, but we still like value such as financials.

The SP 500 is well above its MFU-2 level and has cleared its 200-day average.  We have an upside MFU-3 target at 3360 from here.

We are not chasers of momentum and continue to see indices in areas we don't want to chase. Two important observations from today's action is that the Nasdaq Composite has achieved its MFU-4 target at 9345 which we have been highlighting for some time, and we see a shift starting in Momentum (MTUM) vs. Value (SPLV.)