Good Morning, Traders. Flat day on Friday as expected with options expiry keeping the major averages in a tight range for the entire session. The S&P and Dow were down by just a hair but the Nasdaq lost another 14. Overall volume on the Nasdaq jumped by 11% as well, so that index racked up another distribution day. Under the hood things were bearish with breadth and advance decline lines negative, which indicates that even within the third Friday of the month churning, there were sellers behind the scenes. The core sector list was about 90% in the red. The below daily snapshot of the S&P gives a clear picture of what transpired this week, and where we need to be looking in the week ahead. Key technical points are annotated below:  1. The lower blue line represents a trendline (up) that has been intact since Octover of 2004. This was now violated twice recently. 2. The upper blue line is the daily 200-period moving average. Note that the S&P is now riding firmly below this important level. Generally institutional desks do not want to invest in or hold stocks that are below their respective 200ma's. This tells us quite simply that there are many stocks that have now violated this area. 3. The trendline down from the highs of May 8 is still intact and will be an important resistance level in the coming week, especially since it has confluence with the prior lows and 200ma resistance at area 2. 4. Thursday's 200 point advance in the Dow did not come with a corresponding increase in volume. Total turnover was flat on the NYSE on this day. I expect the market to have difficulty advancing higher over the summer months and maintain that overall bias is now down with a near-term bias of sideways. Furthermore I expect breakout long entries to be difficult in this environment and are more currently interested in short or reversal type entries for overnight and longer term trading.

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.