Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

The last trading day of August came and went with a decent intraday trading range in U.S.equities despite a slow news day and lackluster volume. The low volume is, of course, due to the lead up to the long weekend, which will have even more adverse effects on the market today and tomorrow. As such, the best way to play the rest of this week is to stay away.

To the charts we turn, and for some perspective and because today we start a new month, let’s look at the weekly chart of the Nasdaq 100. The chart looks much like many of the other U.S.equity and sector charts in that the rally over the past few days has taken prices closer to the point where they broke the multi-year uptrend from early August.

Technical analysis 101 dictates that such retests of breaking points are a critical litmus test of the market’s strength/weakness, and if the breakdown was to be taken seriously, stocks will soon fall again. It is, of course, never that easy, but the basic takeaway is that the “relief rally” is now starting to show signs of weakness and we could soon start slipping lower again.

If you recall the chart of the S&P 500, the more significant level of resistance I see is around the 1,240-1,260 area, marked by the gray box on the chart below. We are not quite there yet, but then again, this is not an exact science but rather an art, so it is worth paying close attention to the price action to watch for subtle signs of rally exhaustion.

I have received many emails asking why I don’t think we’ve seen the lows for 2011 yet. The simple answer lies in the below weekly chart of the Dow Jones transports as measured by the iShares Dow Jones Transportation Average Index Fund (NYSE:IYT).

The transports are a group of stocks I consider to be a leading indicator, and major bottoms tend to show divergence between price and the Moving Average Convergence/Divergence (MACD) oscillator. What we currently see is simply a reading below 0 on the weekly stochastics, but no divergence. If and when stocks should fall again, I would look for IYT to at least match its low from August while the MACD indicator confirms a higher low.

For the month, the S&P 500 dropped 5.7%, which is significantly off the lows of the month. While I am hesitant to compare last month’s pattern on a monthly chart to something as recent as just a few years back, it is notable how the long tail on the monthly candle from January 2008 ended up holding as intermediate support but ultimately broke lower a few months later. History tends to have some similarity with select events in the future, so it is not inconceivable to think that the long tail on the August candle may hold for a little while, but at some point, either this fall or as late as early 2010, will give way to lower levels.

The last two days of this week continue to favor doing less, all the while remaining in “sell the rallies” mode. Friday’s non-farm payrolls number may cause some volatility, but attention will quickly shift to the three-day weekend.

• See Sam Collins’ Daily Market Outlook: What Stands in the Bulls’ Way Now
• See Sam Collins’ Trade of the Day: RIMM’s Rally is Just About Finished