Will positive earnings hold up the S&P, and what about low volume?

Market Pulse: July 25, 2011

Last week the September e-mini S&P 500 opened at 1314.50 and closed the week at 1341.00. Friday a doji candle showed uncertainty in the markets. Over the next few weeks there will be a large number of earnings released, many with positive expectations. We have seen a good start to the Q2 earnings season as 85% of the 100 companies in the S&P 500 that released earnings results since July 11 have beaten estimates.

Looking at the daily chart, you can see that currently this contract is in a weak trend with ADX under 25 at 22.95 and pointing down. MACD is over the signal line with little divergence and Stochastics are entering overbought territory. The weekly chart shows a weak trend with ADX at 16 and a weekly range between 1250-1350.

Is volume an issue? Daily volume on NYSE is down 22% so far in July as compared with July last year. If this continues, July will have the lowest average daily trading volume since December 2007. I think we all know what happened not to long after. With weak job growth, a manufacturing slump, and serious debt problems here in the United States and Europe traders have reason to be worried.

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