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The S&P 500 closed lower on the week, and this is the second back-to-back negative performance since the latter part of 2012. The pullbacks thus far have been relatively muted and this does give us some validation for the idea that the market's belief in current stock valuations remains appropriate. Looking at things in terms of historical price activity, however, caution is warranted as there is little to look forward to on the economic schedule, and any major rallies seen at this stage can be viewed as irrational.

The summer months tend to be marked by lower levels of liquidity, so if we do see major moves in commonly traded assets (such as the euro,oil, S&P 500 or gold), the activity should be viewed with skepticism. Range trading methods tend to be viewed as preferable during the summer months, as prices in these assets tend to be confined between well-defined historical buy and sell points. In cases where these ranges break (and traditional support and resistance perspectives are removed) are not likely indicative of the market's wider view. Any indications that these price changes are present should be played in the opposing direction (selling rallies, buying dips).

Expect Profit Taking in the Euro, Oil, S&P 500

Slowing price volatility leaves little reason to have a bullish stance on the euro, and with this month's unemployment data hitting new all-time highs in the region, further downside is expect. This lends to sell positions in the CurrencyShares Euro Trust (NYSEARCA:FXE). Even for those looking at euro buys from a carry perspective, it should be remembered that interest rates are now seen at 0.5% and for those looking for carry value, there are much better currencies to buy for long-term positions. GDP data will be released this week, and we could see growth levels remain in negative territory as the eurozone debt crisis fails to reach resolution.

With these ideas in mind, traders should bet against significant price moves in the weeks ahead. The S&P 500 (NYSEARCA:SPY) itself has posted consistent higher lows since the beginning of the year, and this does suggest that the wider environment retains positive sentiment and is ready to buy on any sign of weakness. Monday's weak ISM manufacturing numbers have given the first indication that bearish sentiment is likely to dominate the June month, with the survey's numbers for May dropping to 49.0 (from 50.7 in the month of April). This is the lowest level in four years and shows that we might be entering into a soft patch for the third quarter. This creates a bearish scenario for the S&P 500, with new sell positions looking attractive at current levels.

Market supply can now be found at 1645, short term buys can be taken in this area but those with a medium-term perspective should be looking for rallies as a means for entering into new PUT option entries. First zone for bearish positions in SPY comes in at 1645.

With manufacturing showing now in the world's first and second largest economies (the U.S. and China), demand prospects for oil are waning. Markets have responded by selling rallies in the commodity, and with prices falling below the 92.20 level (before seeing a small rally), the overall bias for the PowerShares DB Oil Fund ETF (NYSEARCA:DBO) remains to the downside.

Source: S&P Declines Signal Slow Summer