Examining the S&P 500 chart (^SPC) in the wake of Friday's vicious reversal, and if one was to choose to see that index as the "key" indicator for the outlook for US equities, it would be entirely plausible to suggest that there is a heightened probability that the mid-March lows are now back back in play.

The inter-market trading activities that were largely responsible for Friday's fearful session would have left a number of large macro funds rather over-exposed to big bets in a number of markets. Some will not be too comfortable about the size of their commitments and we should expect even more seismic activity this week as these asset rotation strategies continue to play out.

Am I now more bearish on US equities? Yes, a little. Am I willing to start building up short positions in stock index futures, not yet. Especially not at present in the small and midcap indices. On the other hand, as always, I am looking at plenty of opportunities for short positions in individual stocks and sectors.



The chart for the Nasdaq 100 (^NDX) has a very different character to the often presumed benchmark index that we just examined. The price region that we have been in for the last week or so is close to the 62% retracement from the November high and March low. We have been in this region, surpassing the 50% retracement level which has so far confined the S&P 500. What is more we are still essentially intact with the region and in fact, even despite Friday's vicious reversal the close was above even the 20-day EMA.



The fact that the Russell 2000 (^RUT) managed to close above 740 underlines my strong feeling that we are confronting in the US an equity market which has a split personality. Anything involved in the financial services sector has about as much appeal to fund managers as a rabid skunk but elsewhere there continues to be an appetite for many small caps, mid caps and techs.

If the trauma of $150 oil and the spectre of ECB governors who are unwilling to play nice with the US dollar does start to tap into the fears of asset managers and distribution begins to show itself with the non-financials then all bets are off.

Not only could the mid-March be tested, but there would be a serious risk of retreat to even lower levels. At present that is not happening and my crystal ball this morning is a little cloudy as to the likelihood of that eventuality.



Germany's Dax has fallen back to the 6800 level and along with all of the euro zone markets is having to contemplate a very real possibility of higher rates as soon as July. Looking back for the year so far, and putting aside the mid-March was the watershed hypothesis, the German index is effectively in the middle of an extended trading range. Not yet grounds for dusting off financial armageddon scenarios.



Boeing (BA) has turned out to be one of the most profitable short positions instigated over the last week, but exiting the position is now timely.



FXI is one of the ETF's that enables one to have exposure to the Chinese markets. Friday's performance shows a break below all three moving averages on twice the daily volume.



Wells Fargo (WFC) does not appear to be attracting bottom fishers yet and really underlines the distaste for banks that was manifested in Friday's trading. For the time being I am going to take the view that this sector is so hated that traders are becoming immune to new multi-year lows being registered for quality names in the sector.



I still like the long side for Amazon.com (AMZN).



Friday's sell-off brought technical damage to many stocks including the relatively defensive consumer staple, Kellogg (K)



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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