I though they rest on the seventh day?  Apparently not.

We are seeing the 7th day of selling in a row, which has taken the market down nearly 5.5%.  While much of this will be blamed on sovereign debt issues I think it has a lot more to do with the global slowdown that the market is finally beginning to accept.  We've had horrid economic news of late - with last Friday's GDP announcement for Q2 and revision of Q1, the unemployment data from roughly a month ago, and US ISMs dropping significantly.  Also yesterday were the foreign PMI reading which showed significant slowdowns in Europe and depending if you listen to the private HSBC report or the government report out of China, signaled either contraction or a very light expansion in Chinese PMI.

Earnings season has been solid as usual, but the first chinks in guidance have begun to appear - i.e. Caterpillar saying they saw some slowing in China, and many consumer oriented multinationals pointing to the weakening U.S.  The big question as we noted in the ECRI piece last week was, will earnings expectations prove to be too rosy and will there be a mean revision downward closer to the Main Street economy.  Many of our largest companies have relied on massive cost cutting (still a benefit) along with foreign sales (signs of weakness beginning), to create an earnings story that has totally disconnected from Main Street.  They've also benefited from massive U.S. government intervention and stimulus which has filtered through to their revenue line - that is obviously slowing, at least at the state and local level.

The S&P 500, after bouncing smartly off the 200 day exponential moving average yesterday, has retested that level and broken below for now.  As always the close is more important than the intraday action so it will be interesting to see if the dip buyers come in later today as they attempt to do most days.  Obviously the lows of June are also in play here in the 1260s area.  A break below that would be very troubling.

That said, we're reaching very oversold levels so a cursory bounce at the minimum would seem likely in the coming days.