Off the Charts

The selling pressure spread from commodities to stocks on Monday as the S&P (SPY) saw its biggest decline in five months. It was a day to take notice as a wide range engulfing bar erased all of last week's gains and breached upper support levels. The market opened lower this morning following weak data out of China, but the real heavy selling came during (and throughout) the session. The S&P closed the day down 2.30%, the Nasdaq down 2.38%, and Dow was down 1.79%.

We been skeptical of the latest leg of the rally as the S&P pushed above 1474 despite relative weakness from some key sectors like the Russell 2000 (IWM), iShares Dow Jones Transportation Average (IYT) and SPDR S&P Homebuilders (XHB). Also, we have been noting the strength in defensive sectors, which have seemed like the safest (and most lucrative) place to be over the last several weeks. As a trader you should never chase exuberance and complacency, which seemed to start to creep in after a 50-handle bounce last week....800 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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