Traders haven’t needed a crystal ball to recognize market probabilities that we’ve been outlining, evolving over these past several weeks. Now, technicians of course will view this through a prism and debate prospects of the S&P breaking the lows of a week ago Friday, very nearly matching the very early April lows.

In my opinion the broad market, as I’ve mentioned before, already has done this (referencing the NYSE Composite Index and even the Dow Industrial Average). The rotational influences in the S&P actually allowed enough relatively mundane sectors to be moved into in ‘attempts’ to offset the weakness seen in tech and a slew of other stocks that are really more mainstream for the modern era. That is, as I’ve noted for a couple weeks, a fairly traditional warning of bearish behavior, because it was evident (to us anyway) that money managers were engaged in a ‘circling the wagons’ tactic, perhaps intended to provide ‘cover’ for selling in the other areas. That kind of distribution often occurs before even faster drops.

Regardless, ‘circling the wagons’ while internally selling is what we thought they were doing; starting with exiting during both April and early May rebounds; and that includes the snappy but unsustainable bounces of the past week. Ensuing action has borne out our suspicion that the early part of the past week would get a rebound or two; with more selling towards the end of the week. That has now been achieved; and the market (as measured by the S&P we primarily track) is on the verge of taking out the lateral level I’ve referred to as the ‘precipice’.

In sum: whether the Fed ‘goes in June with a hike’ or not; whether Brexit fails or not; whether or not monetary action is taken defensively by central banks; this is a market preparing for further decline. Various zones of strength are vanishing on a rotational basis; and everything that worked for longs probably falters as in a decline of significance, those sectors become ‘sources of funds’.