The equity markets remain under pressure and after a brief rally moved even lower late in the week last week.  The chart shows the potential for a key test at the 200 day moving average and the March 16 swing low of 125.28 on the SPY, an ETF for the S & P 500 Index.  The market continues to slip as summer approaches and could be setting up for a volatile period during the often low volume trading months of July and August.

Goldman Sachs (GS), a key investment and brokerage stock has been declining all during 2011.  The stock opened 2011 at 170.55 and has a yearly high of 175.34 and a low at 131.50 vs. its current price of 137.23.  Another financial we use as a benchmark is the RKH, or Regional Bank Holder ETF. RKH opened 2011 at 86.79 and stayed strong through mid-February with a high of 92.19. It is currently at 77.67 with a yearly low at 75.52.  Both of these should be monitored for clues as to any potential market weakness related to issues in the financial sector and banking industry. 

Yields remain low as the 10 year Treasury closed Friday at a yield of 2.93% after setting a yearly low on Thursday.  Crude Oil dropped further to close at 93.01 per barrel and gold inched up.  Gold appears to be in a positive consolidation and prepared to move higher.  The euro got a boost after a deal was made to roll over debt in Greece.  The bottom line is there is plenty to be concerned about and as the 2nd quarter ends soon the focus will shift to EPS reports for the second quarter.   We do not expect this rally in the Euro Currency to last and any dimming prospects of resolution in Greece could lead to euro weakness.

We expect the consumers worldwide to remain focused on reducing personal debt levels even as the housing market and jobs markets improve which they are struggling to do.  This should have an ongoing impact as the economy struggles to regain solid footing and grow steadily.  This has to remain a focus of the FOMC as they craft an exit strategy to increase rates yet keep credit flowing steadily in the wake of the heavy influence in recent years.  There will be a two day FOMC meeting this week with the announcement taking place Wednesday.  We expect more of the same with the FOMC remaining on hold and being patient.

We expect trading could be quiet the first part of the week after options expiration and into the Wednesday FOMC meeting.  Remain cautious and preserve your capital.