Pre-market update (updated 8:30am eastern):

• European markets are trading -2.3% lower.
• Asian markets traded 3.9% lower. The NIKKEI alone was down 7.3%.
• US futures are trading about 1% lower ahead of the opening bell.

Economic reports due out (all times are eastern): Jobless Claims (8:30am), PMI Manufacturing Index Flash (8:58), FHFA House Price Index (9am), New Home Sales (10am), EIA Natural Gas Report (10:30am), Kansas City Fed Manufacturing Index (11am)

Technical Outlook (SPX):

• There is suddenly a huge infusement of bearishness in the markets after China’s PMI came in below 50, and Bernanke & company had made references about pulling back their involvement in the markets as early as June. 
• This is the main reason for the -7% drop Japan’s NIKKEI. 
• Overnight you have a HUGE inverse head and shoulders pattern that has formed on the S&P futures, where if it can get above 1645, the bulls could thereby push this market somewhat higher. 
• Gap downs are the bears worst enemy. More times than not, they will give up the morning gains. Look for a bottom in the first hour followed by some consolidation and an ultimate push higher. 
• There is a lot of news out there today, particularly with what we are hearing from the FED from yesterday making a lot of traders very nervous. 
• We will open up below the 10-day moving average. We will also be trading below the short-term trend-line which support rests at 1655. 
• The long-term trend-line off of the February lows sits at 1607 today, and likely safe from the reaches of the market. 
• Huge bearish engulfing pattern on the SPY yesterday. 
• Incredible volume in the markets yesterday, almost the highest we’ve seen all year for the SPY. 
• 30-minute chart of the SPX has completely broken down. 
• Drawing a Fibonacci retracement on the most recent market rally, from the April lows, has a 50% retracement at 1604. A 38.2% retracement would be a 1620. 
• My biggest concern, and the reason why I think we will ultimately see some consolidation here, is how far removed the SPX is from the rising trend line off of the November lows. 
• I do have big reservations about whether this market can truly get up to 1700 as quickly as it is trying to do. It has gone straight up since crossing 1600, and bulls have become gluttons in their market outlook. 
• We are up seven straight months, the last time we saw such a rally was when the market bottomed in 2009. 
• Markets don’t care about the economy. That is not what is driving them. The markets only care about what the Fed is doing to keep equities propped up. 
• We haven’t seen a market pullback in excess of 4% since October/November time-frame. 

My Opinions & Trades:

• Sold RLGY at 53.84 from 48.49 for a 11.0% gain. 
• No new trades yesterday. 
• Will have my stops in place today. 
• May consider adding new positions today, depending on the action out of the market. 
• Remain Long JCI at 35.22, GRA at 79.03, DG at 52.75, CMG at 374.07, HOS 52.97, FTR at 4.35, PCYC at 82.54 
• Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX: