The major indices resumed their recent selling trend yesterday; and the Dow closed below 10,000 for the first time in more than three months. All eyes are on a potential meeting with the up sloping 200 day averages. For the Dow (9908.39) that would currently be at 9500, for the S&P 500 (1056.74) the 200 day is at 1021 and for the Nasdaq (2126.05) it is at 2025. Another 3-5% move lower would turn our Ts indicators into an O/S/UP (Oversold/Up) condition and in our opinion would present a great buying opportunity. We are not there yet however and we still see some further selling pressure before the current correction has run its course. So far the selling has mirrored the pullback we saw last July, but the technical breakdowns this time are far more damaging, and we suspect Friday’s lows and the 200 day/50 week levels on the major indices will ultimately be tested. This morning the futures are showing a complete reversal of yesterday’s selling, after reports from Europe suggest a bailout for Greece. During the financial crisis, every near term proposed remedy was met with an initial surge higher, only to then see another wave of selling pressure. We don’t believe that the concerns about the debt obligations of peripheral European nations will have the so-called “contagion” effect that has become a rallying cry for the bears; but at the same time, we don’t expect recent concerns to suddenly disappear. The trend remains lower as the major indices post a series of new lows, and as such rallies remain opportunities to sell long side exposure. The up sloping 50 week/200 day averages often mark an important inflection point for bull markets, and we are within striking distance of such a meeting. Ideally we would like to see a bit of panic and some capitulation if and as the indices move to that level. This morning’s rally on speculation that Trichet will organize a “deal” to save Greece is an oversold short covering bounce, which we suspect may well be met with renewed selling pressure.

S&P 500 (1056.74) has broken all support on both the daily and weekly charts. The 10 day average will provide resistance at 1081 today. The 1083 level was not only the bottom of our previous range, but also the 180 Gann Degree level from the closing high. Any move into 1081/1083 is a near term short set up. The down sloping 20 day average gave a bearish technical signal by breaking below the 50 day average on Friday. The slope of the 50 day is rolling over and is now down sloping. Rallies must be sold. While Friday’s downdraft was quite scary, we still suspect another similar move to that 50 point two session swoon that sees the index testing its 200 day moving average.

Nasdaq (2126.05) The 10 day resistance won’t be met until 2166 today. So while the futures are showing a strong rally this morning, from a technical perspective, this is still nothing more than a reflex bounce. The 20 day fell below the 50 day average yesterday for the first time since April 2nd of last year. Technically speaking the index looks very vulnerable to further selling pressure, and while there is still plenty of room for interim bounces, we would remain skeptical and would sell into strength. We believe the greater likelihood calls for a move to at least the 200 day (currently 2025) if not the 50 week (currently 1951 but moving up very sharply). This would present a great buying opportunity, but in the interim we will look to add defense on rallies.