Good Morning, Traders. First day back after three day weekend and market shows its hand rather decisively, we would say. Earnings season really kicked into gear today and while numbers were decent, the market shrugged it off and focused on $70+ crude and a weaker than expected NY Empire State Index reading. By the numbers, this is how it played out: Crude closed on the NYMEX at $70.32 per bbl, the Empire State Index came in at 15.8 vs a prior reading of 29.0 and a consensus estimate of 24.0, the Dow closed at 11073.78 (down 63.87), the S&P at 1285.33 (dipping 3.79) and the Nasdaq Composite at 2311.16 (for a loss of 14.95). Selling was not totally broad-based as some sectors such as Mining ($GOX) Oils ($XOI), Natural Gas ($XNG) posted gains from the open. The semiconductors, homebuilders, and retailers took it on the chin the worst of the 15 sectors in the ShadowTrader Core Sector List. Where all this leads us technically is basically to an area that we were expecting. Recent commentary has been discussing pivot points just below us in the S&P that will probably be tested if we were to break the trendline on the daily as shown above. We have revisited that chart above showing where those pivots lie just below us. Basically, the situation in the broad market is thus: the longer we push sideways at this trendline support without a bounce, increases the odds that we begin to close below it and move to the lower circled areas. Certainly the fact that positive earnings are failing to buoy the market, as it seemingly focuses more on the new records being set in the crude and gold futures markets, would be construed as a negative for equities in the near term. Be careful out there. Unless you have an all out bear market (which we don't), longer term trading with a decidedly short bias is more difficult than long because the market tends to have an upside bias over time. Keep that in mind as you stay more in cash at this juncture and also stay selective. ShadowTrader continues to keep a close eye on metals, mining, oils and oil services and gaming as favorites to the long side.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.