Markets are under some serious pressure this morning. Europe, and more specifically Italy and Greece, seem to be to blame. Let’s get right to business and take a look at the S&P500:
We’re looking at $SPY to keep it simple. The breakout from late April above resistance did not hold. Now we look at some areas of reference where buyers could come in. The $132.50 level where we find the 38.2% fibonacci retracement and rising 50 day moving average looks to be broken at the open. 131 is next and 129.50 looks like the final line in the sand. Anything below that creates a “Lower Low” and that’s what we like to call a “downtrend”.
Looking at multiple time frames is important here. If we take a look at the 60 minute chart we can see a declining channel going back to the highs at the beginning of May. We’re going to open up this market towards the bottom of that range. Let’s see how they react there before drawing any conclusions too early.
Again, we have not seen the sector rotation that we have been waiting for (see here). Who is going to step up? Retailers got hit on Friday, although $AEF managed to rally back and $AMZN held in relatively well. Consumer Discretionaries and Financials are areas where we look for leadership in an uptrend. Although discretionaries have held in pretty well, Financials have been a disaster, $GS $JPM $BAC. The relative strength remains with the defensive sectors like Consumer Staples and Healthcare. It doesn’t look like we’ll see new highs in this market until it rotates.
At the time of this writing, the futures were off their lows, but still ugly. We’ve had 3 straight down weeks for most of the major indexes. Let’s watch these levels above for potential support/entry points.