Futures up modestly after a mixed day yesterday- its true that the S&P 500 and NASDAQ Comp / NDX 100 made new secular highs again (bringing out more bulls on CNBC than we have seen in a while), but several other indices were flat-to-down on the day through some modest profit-taking / consolidation. We continue to view the long-term cycle as bullish; however we remain concerned that U.S. markets may be a bit too extended / frothy on a short-term basis- and thus would be on the watch for further consolidation especially in the September-October timeframe (we had looked for a pullback as early as July, but that was obviously muted as investment dollars continued to rotate toward U.S. markets).

One of the key charts we are watching currently deals with the ‘negative divergence’ noted yesterday- on the charts of the NDX 100 Index, this stands out rather clearly in our opinion-

NDX: 7570.25

Note that as the NDX rallied to new highs again yesterday (top red circles), this came against waning momentum (lower portion of chart)- divergences such as this typically come before a correction / consolidation of some sort (either major or minor).

We expect trading volume to continue to thin out as we approach the long weekend-  today GDP numbers are reported (4% consensus- remember when they struggled to get to 2-3%??).

We would continue to watch the following short-term levels:

Index                    LSP                         Initial Support
SPX                        2896.74                 2840-2850
SML                       1092.96                 1060-1080
NASDAQ              8017.90                 7800
MID                       2044.06                 2000
RTY                         1728.41                 1700
DJIA                       26049.64              25450
NYSE                      13102.03              12900-13000