In the past 24 hours the S&P futures have managed to break below both June and May lows on rising sell-side volume. Though the S&P futures are fighting back up to May lows as we type, it seems the damage may be done.

Crude futures have skidded back towards $60/bbl, and the USD/JPY has made what could be a trend-setting movement to the downside. Meanwhile, the Dollar is appreciating everywhere else across the board, and the 30 Year T-Bond futures are posting large gains on sizeable volume.

Therefore, most all of the S&P's key correlations are confirming the significance of today's movement. The volume is there to match the movement, and our downtrend lines are reaching an inflection point with our 1st tier uptrend line. Speaking of which, we believe our 1st tier uptrend line forms the neckline of a large head and shoulders pattern (labeled in our chart).

Hence, we could be witnessing a right shoulder reversal, which would further support the confirmation of a downtrend. On the bright side, we haven't seen any earnings results yet, so an optimistic earnings season could turn the ship around. It seems as if investors are beginning to price in a negative earnings season, so it will be intriguing to see how the S&P reacts to the news, to say the least.

The most disconcerting part of today's key reversal is that it comes on only a little concrete news/data. Investors received weak data from Britain, yet positive numbers from Germany.

The most negative signs came from Japan, which released worse than expected Core Machinery Orders and Current Account data. These two data points show export demand isn't recovering as quickly as analysts had hoped, indicated consumption is still declining quickly. The news out of Japan is hitting the USD/JPY badly as investors run for cover.

As we've stated previously, 2nd quarter earnings and 2nd half outlook remain the highly anticipated events on Wall Street, it just seems the markets may be a step ahead. From here it will be interesting to see whether the S&P can pull itself together and stabilize back above May lows.

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