The S&P 500 Index (INDEXSP:.INX) is now trading back at make-or-break price support levels. Although stocks are likely to find initial support, a bearish hourly trading pattern suggests a breakdown could be imminent in the days ahead.
While the Financials Sector (NYSEARCA:XLF) has been outperforming of late, nearly all other sectors have fallen on hard times, with Consumer Discretionary and Industrials breaking down in the last few days. Even Technology and Energy have weakened in the last week and the weight of the broader market seems to be shifting back to the downside.
Looking at S&P 500 futures, pullbacks under 2122 have little support until 2107. And should the early October lows fail to provide support, then that would point down towards 2070 ahead of the election.
With the S&P 500 already teetering at important price levels, it’s good to take a look under the hood. Below are 3 additional near-term market concerns for traders:
1).  Small-caps have broken down. The Russell 2000 (INDEXRUSSELL:RUT) and small cap stocks have broken down under support and may add another meaningful headwind to this market. This is evident on the Russell 2000 ETF (NYSEARCA:IWM) chart – price has fallen under 120.11, which represents an important breakdown. Additionally, the entire trend from early February was violated in absolute terms along with relative charts of IWM to SPX severing key channel support on Thursday. Until this is regained, a violation of an uptrend which has held nearly the entire year is a notable negative for the market, and Small-caps should be underweighted in the days/weeks ahead, thinking that further weakness is likely.
2).  Yields surging.  The surge in treasury yields looks to be causing some concern for stocks.  Just as the period in mid-September that saw a rapid rise in Treasury yields above 1.62% resulted in equities pulling back in tandem, we look to be at a similar juncture. The breakout above 1.80% and rapid steepening in the yield curve might be catching the market a bit off guard. Despite the positive strength in Financials that’s happened, the rest of the market just isn’t acting well. Breakdowns in Consumer Discretionary and Industrials look to be happening, while Energy and Technology are pulling back in sympathy. The weakness in AMZN is likely to aid further weakness in Consumer Discretionary. With Small-caps giving way, if Technology turns down with greater force to join Discretionary and Healthcare, that would represent 49% of the S&P 500.
3).  Sentiment is mixed, if complacent.  Investors are not too fearful given the recent wobble in stocks. Meanwhile, the VIX remains remarkably subdued given this indecision regarding the Election. And with interest rates moving higher and the Put/call ratio on equities around .55, investors seem complacent. Thus, a near-term pullback which causes fear to escalate would translate into a better buying opportunity for gains into year-end.
Get more trading insights and market analysis over on my blog Newton Advisor.  Thanks for reading.
Twitter: Â @MarkNewtonCMT
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
