June 2, 2008

Stocks were spooked from the get-go. There was a mentality of “sell-first, ask questions later” approach heading into the market’s open. Though the manufacturing and construction reports suggested contraction, that is well known and expected at this juncture in the markets. Instead what we had today were nervous bulls who weren’t expecting the rebound that we got last week in the markets, and as a result, are not taking any chances heading into the new week and new month. Also worth noting is that summer months have traditionally been week overall.

It’ll be important for the NASDAQ that we just don’t hit resistance/last month’s highs, and then quickly retreat back to the trend line, but instead the bulls are going to want to see a break of the mentioned highs. The S&P’s task is a little bit more difficult, as there is a defined Head and shoulders pattern emerging, and unless it is able to exceed the high put in from last month, we may have to consider shorting the S&P, assuming the technical picture continues to deteriorate.

Here’s the NASDAQ and S&P Charts…