About that Holiday Weekend Sell-off

Stocks are selling off after Friday's disappointing jobs number. That's the reason I keep hearing about, anyway. Truth is that a pull back in prices was coming at some point. We've seen bearish divergences in S&P components' new 52-week highs as well as momentum in the index itself.

I think that it's too early to call for a major correction. But there are a couple of levels that I'm watching. The first important one is this 1370-1375 level that was resistance in late February and early March. There was about a week of selling here before the monster March 13th rally that saw lift-off from these prices. There is definitely memory here. You also have an upward sloping 50-day moving average to help catch falling prices:

This is really a key level. I would imagine that there would be some buyers here. More importantly, you want to see the right sectors being bought up. I think that's going to be the tell. Last week we saw out-performance in the defensive areas like Consumer Staples and Healthcare. The most amount of selling came in Financials followed by the 'global growth' areas; Materials, Energy and Industrials. This is not the type of action you want to see in a bull market. Some flight to safety is normal during a correction, but any extended action like this would be worrisome.

We've said over the last couple of weeks that a rotation into Energy and Materials was necessary for the major averages to continue higher. Also, Copper was consolidating in a way that a breakout or breakdown would be an important tell. So here we are and not only has the rotation not come into the Energy and Materials sectors, but Copper appears to be rolling over as well. These are the areas that I'll be watching to confirm that any buying that comes in is for real.

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