Stocks Have Flipped—So Look for More Downside

Trader on the floor of the NYSE
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Trader on the floor of the NYSE

Markets trade in trends. On Monday, that trend flipped to negative.

So why was it such a pivotal day for determining short-term market direction?

The list of negative market factors begins with the dramatic sell-off in gold and other commodities. A market move of such magnitude, regardless of the underlying rationale, tends to be negative for the market, as the perception of instability pushes people into a risk-off mentality. Also, weak numbers out of China and Germany should add to the market weakness. The domestic terror event in Boston will also hurt overall sentiment.

After a 14 percent gain since Jan. 1, it is apparent that equities are due for a market pullback. If the current bounce in June S&P E-mini futures carries them up to 1,564, I would consider it a sell opportunity, with an objective of 1,532. A settle above 1,571 would stop me out of the trade.

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