The S&P 500 futures are currently trading "inside" yesterday’s range after the index failed to find key support at the 1280 level. As I argue in what follows many stocks and ETF’s are starting to take on rather extreme levels from an MFI/RSI perspective - which is not to say that they cannot become even more extreme! - but the likelihood of some attempt to break back above 1280 is something I would not be surprised to see today.

I'll be taking some time off from my daily commentaries. I really want to focus on completing a book on macro analysis which has been too long in the making and also to catch my breath from writing these columns for more than five years. I'll be back in the fall so in the meantime I wish all readers a very pleasant and prosperous summer.



After several sessions of upward progress - admittedly in small steps - the Shanghai index suffered a sharp setback in Asian trading as it dropped by 1.7%.

Over the last few sessions the lower volatility band has moved lower towards 2600 and it is now more likely that this index needs to revisit more strategically significant support from last September - perhaps down to the 2570 level since on Sept 20, 2010.

If attrition continues for Chinese equities this would portend a game changing slowdown in this vital market. Not the least of the awkward consequences for world-wide economic prospects would be a severe questioning the supposition that China is an unstoppable economic dynamo, which has been relied upon by policy makers of the more advanced economies.

It would undermine the enormity of their reliance on China to provide the engine to sustained growth, and the trickle down effects to world trade, expanded export markets etc. as a justification of how they will grow their way out of their seemingly endless addiction to issuing more public debt.



The Aussie dollar is now testing a critical uptrend line as the correction sets in and the arrow indicates my intermediate term target.



XHB, the exchange traded fund for the US homebuilding sector, has now dropped below some key technical indicators including its 200-day EMA.

In the longer term this sector needs to find a credible base - and not one that is "gamed" by various algorithmic strategies. As several commentators have suggested the major problem facing the US economy is the glut of property - much of it in foreclosure - which needs to be worked off before there can be any meaningful stabilization of domestic real estate prices. Without that in place the US consumer will continue to have subdued animal spirits and ultimately that will determine the growth rates in US GDP rather than another round of debt monetization.



Citigroup (C) has pretty much been in freefall recently and with extreme values being registered on several technical indicators, the troubled financial sector in the US (and in Europe) may be getting ready for a bounce.



Goldman Sachs (GS) has not been behaving at all well recently, although I hesitate to recommend a short position as this is one of the trickier stocks to trade in my experience.



The daily chart for Bank of America (BAC) captures the anxiety that many fund managers have about the deteriorating appetites of the previously robust US consumers.

Once again the stock appears to be entering a price zone where there may a relief rally - even though the analysis provided by Meredith Whitney on the weak prospects for US bank earnings seems quite compelling.



Research in Motion (RIMM) has been dropping like a stone as Blackberry users are becoming enticed by Android based hand sets and the iPhone.

The only observation that I would make is that an MFI reading of 8 is one of the lowest that I can recall seeing and the stock has clearly been a favorite for short sellers who will eventually want to cover their positions to lock in gains.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.