The key test for the bulls today will be to re-challenge the S&P 500 high from yesterday.

The S&P 500 futures are drifting lower in European trading on Tuesday morning, and, if the possible support around 1050 is sliced through decisively when trading begins in North America, Clive Corcoran would be looking for a return to levels in the 1040 zone.

The weekly chart for the Nasdaq 100 (NDX) shows that a key trendline has been violated and that the critical level around 1650 would likely be tested in coming weeks.

Strong cross currents - both technical and fundamental - are currently creating turbulent conditions for the S&P 500. Clive Corcoran expects another test of 1100 in coming sessions.

The risk/reward ratio for US equities has now tipped from being favorable to being more risky, and Clive Corcoran has decided to exit all of his net long exposure to equities and also to the FX carry trade.

The lack of volume on upward movements in equities is still a cause for concern, but there are indications that those who are pulling the trigger on the short side are being easily spooked and this is providing the catalyst for further upward progress.

With earnings reports due later this week, Clive Corcoran would focus on short-term trading opportunities with a tendency to do the converse to the bi-polar moves which are likely to be seen based on "news".

If the diagnosis that risk is back in favor is correct, the place to be in equities could be the small caps as their higher beta will deliver the most accelerated upside returns.

The 30-minute chart for the S&P 500 futures reveals the break of the trend line which coincided with the US dollar dropping to the 87 level against the yen this morning.

The single factor that may keep a bid under equities for the next couple of weeks is the announcement of Q2 earnings. But attention will be as much focused on the quality of the earnings as on the outlook statements that accompany the reports.