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Brace for a tough rest of the year

Talking Numbers

What can we expect from the markets ahead?

August has been quite a month for the markets, and that’s not even counting the three hour shutdown of the NASDAQ on Thursday.

After reaching record highs at the start of the month, both the Dow Jones Industrial Average and the S&P 500 are in negative territory. The S&P 500 is off by 1.5% since August 1 while the Dow has given back 3.3%.

Though the week before Labor Day is considered one of the quietest times of the year, some economic data coming out the next few days may have amplified effects in such thin markets.

(Read: Guess who just called for ending trades busting?)

This week will see data on durable goods, the Case-Shiller Index, the MBA Mortgage Index, pending home sales, the GDP, personal income, and the Chicago Purchasing Managers Index (PMI).

None of these is particularly earthshattering but markets are jumpy at the moment. The big thing weighing on everyone’s mind is whether the Federal Reserve Bank will taper its $85 billion per month bond-buying program known as “quantitative easing”. That policy led to a bull market in bonds and lower interest rates. When Fed policymakers began hinting at a taper back in May, traders began selling their bonds, leading to an increase in rates. Higher interest rates are generally considered negative for stocks.

(Read more: Fed's hawkish message a lever for rates)

So, what can we expect from the markets ahead?

Steve Cortes, founder of Veracruz TJM, says housing will have a negative impact on the markets. “It’s going to be a tough time -- a tough week – last week into Labor Day for the S&P,” says Cortes. “In fact, I think a tough rest of the year.”

But, do the charts agree with Cortes? Looking at the technicals is JC O’Hara, Chief Market Technician at FBN Securities. He has very different opinions on what’s driving this market.

Who’s right, Cortes or O’Hara? And, will the rest of 2013 be as difficult as Cortes says? Watch the video above and decide.

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