After yesterday's selloff, I am sure that some were sucked into the short side, convinced that we would be breaking the July lows.  Not so fast...  I have been talking about 'T' theory and how that time dynamic should provide support through August 8.  Time cycles are also lining up in the August 5 - 7 range on the Nasdaq and Russell 2000.  Another clue in yesterday's trade was the noticeable drop in volume.  That said that yesterday's decline was more of a buyer's strike than selling conviction.  In yesterday's piece, I laid out resistance areas to look for that should bring selling into the market.  Those still stand (2385 - 2400 on the Nasdaq and 717 - 729 on the Russell 2000). 

With all of this being said, I am also watching to see if a tradeable bottom will form here.  When a market is in a situation like this, remaining defensive is the way to go.  The trend is still DOWN, and we need to let enough time pass before the next move begins.   If this is a tradeable bottom, there will be plenty of time to jump in on the long side.  If not, remaining defensive will preserve capital.   Never, ever let preconceived notions cloud the messages that the market is sending.  Of course it is hard not to have a bearish tilt right now with all of the negative news out there, but if the market begins to show signs of a bottom, we need to be ready to act. 

As for gold, that trade is still setting up nicely.  Notice how trade has quieted down considerably there as we head into the cycle low due on August 4.  Support remains in the 909 - 913 area.  Those looking to get long gold should begin accumulating positions on weakness this week as gold completes its wave pattern.  See the updated gold chart below: