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The Greeks' inability to form a government has put the entire world in "risk off" mode. Indices all over the world are in red, and Europe particularly is getting slammed. I will be watching the 1340 level as it has served as an important support level. Additionally, despite numerous calls of a bursting of the bond bubble, bonds (NYSEARCA:TLT) are approaching all-time highs.

I provided my reasoning in this article to expect a range bound market. However, I recently noted some positive developments in this article. Needless to say, today's open is certainly damaging for the bull case. Obviously, the close is more important, and if my assessment of liquidity entering the markets is correct, then this weakness should be bought.

One point of optimism possibly indicating selling exhaustion is that despite the avalanche of negative headlines beginning last week -- Socialists coming to power in Greece and France, underwhelming jobs report, negative economic data, increasing likelihood of Greece exit from Euro, and the Spanish banking crisis -- the market has digested this news resiliently. We are only a few points below last Monday's open. I've always believed that the reaction to the news is just as important as the news itself.

That being said, any moves up in the past week were met by selling and a close below 1340 (SPX) or 134 on the SPDR S&P 500 ETF (NYSEARCA:SPY) should give caution to bulls.

Chart in Focus

(click to enlarge)

Overnight Action

  • Globex, High:1350.95 Low: 1335.95
  • DAX -2.11%
  • Spain -2.7%
  • China -1.76%

Market Moving Releases

  • Tomorrow - Retail Sales, CPI, Empire Manufacturing

Earnings of note

  • Agilent (NYSE:A), after market close, Estimate: 0.73
  • Groupon (NASDAQ:GRPN), time not supplied, Estimate:0.01
  • Renren, Inc. (NYSE:RENN), after market close, Estimate: -0.04

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: S&P 500 Gapping Below Key Support Level