Stocks on Wall Street had their least volatile two-month period in more than a hundred years this summer, as the S&P traded in a 2%-range from mid-July up until Friday. Experienced traders were prepared for that to change last week, as sadly enough, the summer officially ended with the Labor Day weekend. The holiday-shortened week started out on a positive note, despite the huge miss in the ISM non-manufacturing index on Tuesday. The major indices seemed to be headed to a bullish breakout, led by small caps, but the tide turned on Thursday. After that, traders witnessed the largest decline since the “Brexit” vote on Friday, which quickly carried the indices to multi-month lows, as they all lost more than 2% of their value.

The European Central Bank’s monetary policy meeting changed the course of the market on Thursday, as “Super” Mario Draghi failed to meet investors’ expectations, by leaving the bank’s quantitative easing program unchanged. The announcement led to a two-day bond massacre that dragged stocks lower as well. Before the Fed’s meeting next week, the Gorilla will pay close attention to the retail sales number and the Philly Fed index, which are set to be released on Thursday, while Friday’s CPI number could also turn out to be important input for the FOMC committee.

The technical picture turned slightly negative on Friday, as the major indices violated several “support” levels, and finished the week below some of the crucial moving averages. The Nasdaq, the Dow, and the S&P 500 all start the week off under their 50 – and 200-day moving averages, with the technology benchmark showing the most relative strength. Small caps continue to provide hope for bulls, as the Russell 2000 looks to be in a healthier state than the large cap indices, closing right at its long-term moving average on Friday. The Volatility Index (VIX) jumped by more than 30% and finished the week above 16; the highest level since the Brexit-panic in June.

Market internals also took a hit on Friday, although the big picture remains bullish, and the correction has only caused limited damage so far. The Advance/Decline hit all-time highs again earlier on the week, and finished in the green as declining stocks outnumbered advancing issues, by a 3-to-2 ratio on the NYSE and by a 4-to-3 ratio on the Nasdaq. The number of new 52-week highs actually increased on both exchanges, with an average of 189 on the NYSE and 174 on the Nasdaq, while the number of new lows was virtually unchanged at 10 on the NYSE and at 32 on the Nasdaq. The ratio of stocks above their 200-day moving average hit another 3-year high above 78% on Wednesday, but it finished the week at 73%, following Friday’s rout.

Short interest also ended a positive period on both the NYSE and the Nasdaq towards the end of last week, although the list of the most shorted stocks itself was mostly unchanged. Emergency room operator Adeptus (ADPT) and medical marijuana company Insys (INSY) remained at the top, with short interests of 59% and 66% respectively. Auto part distributor Autozone (AZO) entered the list of the stocks with the highest day-to-cover ratios (DTC), with a reading of 17, as Marriott (MAR) still has the highest ratio of 25. Western Union (WU), on the other hand, is drifting lower on the list, as the DTC of the worldwide payment provider has fallen to 16 in recent weeks.

The next week will probably bring more heated action to Wall Street, as the traders return in full force after the holiday season. The election campaign is also in its final stretch now, and the race for the presidency looks closer to the Gorilla than most investors realize. The market ignored this year’s unconventional campaign so far, but with the official debates quickly approaching that might change soon. That said, central banks probably still have the strongest influence on stocks, and with the Fed and the Bank of Japan both holding their monetary policy meetings next week, traders could be in for a wild ride in the coming period. The Gorilla remains optimistic in the long run, but bulls might have to hold on tight, should the correction continue this week. Stay tuned!