Hope you had a nice weekend. Seems like we're getting an extended summer here in the Southland. Actually, it was too hot and too dry. Everyone's walking around sneezing and allergy meds seem to be a more popular purchase than Halloween candy right now. Speaking of Halloween, the indexes have investors spooked right now, but let's see if it's really warranted. In an effort to give investors something to cheer about today, U.S. retail sales rose in September as Americans bought more cars and gasoline, while a gauge of consumer spending pointed to stronger-than-expected economic growth in the third quarter. Retail sales increased 1.1 percent, the Commerce Department said on Monday, beating expectations after an upwardly revised 1.2 percent rise in August. Retail sales outside of autos, gasoline and building materials -- a barometer of consumer spending known as core retail sales -- rose 0.9 percent last month. There's been a consistent undertone of late pointing to economic improvement here at home, and it couldn't come soon enough. Here's why... All of the major indexes have pulled back over the last three weeks with the NASDAQ 100 (^NDX) being the weakest of the bunch. That makes sense since the NASDAQ was the market leader ever since this long-term rally got legs back in the Spring of '09. As goes tech, so goes the rest of the market for the most part. That's been the theme pretty much all along. While the S&P and the DOW have experienced modest pullbacks, the NASDAQ Composite and the ^NDX have managed to retrace almost a perfect 3/8 of their complete moves that began with the summer low back in June. The recent move lower has been pretty fierce with not much relief in the process, so it probably feels much uglier than it has really been so far. We've anticipated where the markets are trading at right now, but to be honest, we really didn't think it would happen this quickly. So the big question now is, where to from hear? You've heard us talk about Fibonacci retracement levels and displaced moving averages ever since you started reading our publication. Although they are not the holy grail of technical tools, they are our most favorite for many reasons. Before I share with you what we think is going on with the indexes right now, there's a key point I need to make clear, which is the basis for today's technical piece on the indexes. Stocks and indexes that are thrusting in an upward direction for weeks or months usually adhere to a very key rule that involves a displaced moving average. When a stock or index decides to pull back after thrusting upward, if the upward trend is going to stay intact, it is usually resumes its upward trend by getting back above the DMA in reference within about three or four bars of the chart's timeframe in question. With that being said, today we're going to use the 3X3 DMA on the weekly chart of the NASDAQ Composite. I've drawn three trend lines and included the complete 3/8 retracement level of the move I referenced above. With credit to Elliot Waves, the first green trend line is labeled move A, the second B and the third C. This represents a completed pattern with the beginning of a new pattern developing very soon. Since the COMP has retraced almost a full 3/8 now, the index is at a very critical point, which means what happens from here will likely be very leading in nature in terms of telling us what this market is going to want to do in the weeks and months ahead. If leg A of the newly developing pattern is going to suggest a whole new leg up in the market, the COMP must get back above the 3X3 DMA (blue line) over the course of the next three weeks. This would suggest we're likely going to get a pretty strong relief rally in the next couple of weeks. If for some reason we don't and the markets move lower, we'll still probably get a relief rally, but that will only be an opportunity to get out of the market in anticipation of further downside. What I'm saying here is if the COMP convincingly breaks below the 3/8 level and continues lower, that may very well change the landscape of this market on a go-forward basis. If the COMP can back above the 3X3 over the next three weeks, there's a good chance of a continued rally and new leg up for stocks. Is it a coincidence that the NASDAQ is teasing with us right now while we're in the teeth of third quarter earnings and the elections literally the same three weeks away I mentioned above? Absolutely not. This market is very efficient and represents very smart money making their moves over the next couple of weeks. The bottom line analysis here is the next three weeks, in my opinion, is going to give us a very clear indication of what this market is going to do in the months ahead. Remember our research edition a few weeks ago on what happens when a new President takes office? Over the course of history, it's never been good. Past Presidents have had an eerie consistent habit of turning over a market that ends up declining, that's not a political opinion, it's a fact. Conversely, when someone is re-elected, it usually results in things continuing as they were, almost status quo like. Since we obviously don't know who is going to get elected, this is why the indexes have put themselves perfectly into a position of an "either or" scenario. As things develop and unfold with the major markets, we'll keep you in the loop. However, the old adage "the trend is you friend" suggests there's no reason not to take advantage of the recent weakness until proven otherwise. With this in mind, we've got four stocks we've suggested for huge gains previously that have pulled back now and provided potentially excellent entries yet again, as you long as you think the recent pullback in the markets is nothing but just a breather for better things to come. American Apparel (APP), JC Penney's (JCP), Mankind (MNKD) and Yelp (YELP) are all literally sitting on perfectly logical retracement levels from their parabolic moves, which started at various times in previous months when we suggested the ideas, before they made their climbs up the charts. APP, JCP and MNKD have retraced a complete 5/8's, while YELP has retraced 3/8's of its nice recent move up. What's interesting here is you probably can't find a more diverse base of ideas than these, since they're all very much different in sector class and business models. I can't include all of the charts as that would be a formatting disaster here, just be rest assured the pull backs I've mentioned here are very clear to see if you're willing to pull up the charts yourself. I suspect if this market is going to start working its way higher once again, these four stocks should be part of the rising tide. However, in the event this market decides to take on a whole new long-term cycle of downward momentum, I suggest you set a stop loss you're comfortable with somewhere behind those logical retracement levels. I'll give you one example here before we let you go today. Let's use YELP as the example. I've included a daily chart above displaying YELP's 3/8 retracement level (in red), which sits at $24 per share. If I take a position in YELP, I'll likely set my stop loss in the idea behind the 3/8 retracement level somewhere around $22 per share. This would give it a little breathing room and allow me to experience a nice run in the event the rest of the market starts finding some buying support. As always, be opportunistic and take profits when they're healthy. Until this market takes out a new high, literally anything can happen. If and when the market wants to test its recent highs, we're convinced there's plenty of upside on the heels of that test. Have a great Monday, we'll see you tomorrow.