The U.S. markets took some time off to rest after the QE-infinity party the prior week. We were fortunate that "resting" only meant a sideways consolidation to digest gains instead of a correction lower. That's especially true given the sell-off in the transportation sector this past week, which fell -5.8% and closed at new six-week lows. FedEx (FDX) is partly to blame with the company lowering guidance. It's usually not a good sign for an economic bellwether like FDX to issue a warning. On the other hand we did see shares of Apple (AAPL) top $700 a share on the launch of its iPhone 5.

Overall it was a low volume week but that changed on Friday with volume surging due to a quadruple witching expiration and a rebalancing of the S&P 500 index. Throughout the year there are stock buybacks, stock splits, mergers, and secondary offerings. The index rebalances to help bring the size of its components back into alignment. On Friday that meant there were 350 stocks that index funds needed to buy and 140 they needed to sell to rebalance the fund to match the adjusted index.

Gold was garnering some positive comments last week. Multiple analysts were raising or reaffirming their very bullish price targets. Currently we're in a global QE environment with multiple nations printing money. All this extra currency means it takes more dollars, euros, yen, and yuans to buy the same ounce of gold. One firm expects gold to reach $2,000 an ounce within the next nine months. Another analyst is suggesting $2,000 within six months and $2,400 by the end of 2014. One Bank of America analysts suggested gold could rally into the $3,000 to $5,000 an ounce range over the next few years. Gold ended the week around $1,790 an ounce. If you agree with these analysts and think gold is going higher let me remind you that nothing moves in a straight line for very long. There will be corrections. After a sharp multi-week rally in gold I would expect a dip sooner rather than later.

It was a relatively busy week for economic data. The New York Empire State manufacturing survey fell to its worst level since April 2009 with a reading at -10.4. That's down from -5.9 the prior month. Countering that was the Philly Fed survey for September, which came in at -1.9. That is up from last month's -7.1. The real estate market is showing improvement. The NAHB housing market index rose to 40 in September, which was above estimates and better than August' 37. Building permits were just a little better than expected coming in at an annual pace of 803,000. Housing starts came in at an annual pace of 750,000 compared to a downward revised 733,000 the prior month. Existing home sales surged to an annual pace of 4.82 million versus estimates of 4.58 million. One of the biggest positives for the real estate sector this past week was earnings from builder KB Home (KBH). KBH said their average price was improving, home deliveries improved, and they were seeing significant improvement in California, which has been a trouble spot for the industry.

In other news the situation with Iran continues to boil. This past week stories were circulating that Iran was targeting the websites of American firms like Bank of America, Citigroup, and JPMorganChase with denial of service attacks. So if you tried to log into your account and couldn't succeed now you know why. While the "attacks" are ongoing it seems the banks have managed to find a workaround to reduce the impact of Iran's aggressive actions. Iran claims this is retribution for the sanctions currently in place against their country.

Major Indices:

The S&P 500 index spent most of the week churning sideways inside the 1455-1465 zone. There was a spike down on Thursday morning but traders immediately bought the dip at the 1450 mark. Technically the S&P 500 remains inside the top half of its rising bullish channel (see chart). Can it rally from here? Of course it can but I'd rather see a pullback and a retest of 1440 as support again. That may not happen. We're about to enter the last week of September and that means it's the last week of the third quarter. Odds are good, with the major indices near multi-year highs, the markets will see some window dressing so the quarterly statements from your mutual funds will looks healthy and in the "right" stocks.

The levels to watch have not changed. There is potential resistance at 1480 but the real level to watch overhead is probably the 1500 mark, which could prove to be a tough level to crack. We just saw a bounce at 1450 but I'd still look for stronger support at 1440 and 1420.

chart of the S&P 500 index:

The NASDAQ spent the week churning sideways between 3150 and 3200. The fact that it did not see any serious profit taking is a positive, especially considering the weakness in the semiconductor sector this past week. Odds are pretty good, with what could be a week of window dressing in front of us, that the NASDAQ will breakout to new multi-year highs. The levels to watch are 3200 and 3250 as resistance. The 3150 and 3100 levels are short-term support.

chart of the NASDAQ Composite index:

The small cap Russell 2000 was the weakest of the major indices with a -1% pullback for the week. This isn't too surprising. The $RUT had rallied right to its all-time high near 868 so a pullback from resistance is common. I can't guarantee the dip is over but the general trend is still up. We can look for support near 840 and resistance at its highs near 868.

If the $RUT can breakout to new record highs above 868 I would not be surprised to see it run towards the 890-900 area.

Daily chart of the Russell 2000 index

The Dow Jones Transportation average is not helping the bulls. The sector index has reversed sharply this past week. Another earnings warnings from FedEx (FDX) and a new one from Norfolk Southern (NSC) certainly didn't help the industry. Now the index is at a new six-week low. The $TRAN is short-term oversold at this point but it can always go lower.

Daily chart of the Dow Jones Transportation Average

This week we will get another look at consumer confidence and sentiment. We'll also see more reports on the real estate sector. Nothing is really very market moving but the next estimate on Q2 GDP and the Chicago PMI could influence the market if they are too far off the estimate. ECB President Mario Draghi could make headlines when he speaks in Germany on the 25th.

Previously we were expecting the IMF to release their next review on the country of Greece. Yet there are now reports that the U.S. has actually asked the IMF to postpone releasing their review until after the U.S. presidential election to avoid any unnecessary economic distress the report might cause.

Economic and Event Calendar

- Monday, September 24 -
(nothing significant)

- Tuesday, September 25 -
Case-Shiller 20-city home price index
Consumer Confidence
ECB President speech

- Wednesday, September 26 -
New Home Sales

- Thursday, September 27 -
Weekly Initial Jobless Claims
Durable Goods Orders
Second Quarter (U.S.) GDP (3rd) estimate
Pending Home sales

- Friday, September 28 -
Personal Income & Spending
Chicago PMI
Michigan (consumer) Sentiment (final reading for September)

The Week Ahead:

Looking ahead we could see a lot more headlines out of Europe. Spain was making news late last week as they work on potential reforms. Spain is trying to get things in order before asking the ECB/IMF for additional bailout help. That's pretty amazing just by itself. For the last two years we've heard that Spain and its $1.5 trillion economy is just too big to bailout. Yet it seems like Spain is about to ask for one.

Shorter-term I would not be surprised to see a dip on Monday. The Dow Industrials have been negative 14 out of the last 15 Mondays. Yet I would expect traders to buy that dip. I mentioned window dressing early. Not only could the markets see window dressing before the third quarter ends on Friday, September 28th but the end of October is also yearend for many mutual funds, that could also fuel more window dressing.

In summary, the market's trend is up. The major indices are relatively close to multi-year or all-time highs. They could see a dip but odds are smart money will be buying any dips this week. Window dressing could drive new highs. Potential catalysts for the bears would be negative news out of Spain and disappointing Q3 earnings results. The Q3 earnings season should start in about three weeks.

We will see another jobs report in about two weeks. The presidential election in the U.S. is just six weeks away. Don't forget to register to vote!