Faltering

The SP500 broke below the widely watched 1040 level last week. Talks are beginning to surface once again about a potential double dip US recession. The dismal job creation number clearly indicating the US economy is not recovering as many people were betting on. Until some clear signs on where the US economy is heading, the market will continue to falter.

In June, the market was watching the Euro-zone. Now, the focus is on China. Lot of people was betting on China's growth to bail out the global recession, especially US. However, one cannot overlook China's growth is depended on the growth of the US economy. Since China has not developed a large middle-class to become an internal consumption economy. Therefore, if the US economic recovery falters, China's growth will be limited.

Here is the latest daily price chart for the SP500:




The measured move from the break of the 1040 baseline (head & shoulder pattern) put up a likely downside target near 870. There are technical divergences that indicate a potential oversold rally could occur in the near term. Any near term rally is a good opportunity to exit longs and establish new short positions.