Early Tuesday morning, European stocks are trading marginally higher, with the US Dollar and Japanese Yen weaker. We could be seeing some recovery in risk appetite, as traders look forward to action in Europe this week on Greece’s debt issues. However, sovereign debt problems are not confined to Greece. Any strength in equities, and weakness in the Dollar and Yen, is likely to be short-lived.

Looking at the chart for SPY, we can see the hammer that formed late in the day on Friday, either due to expectation of European action on Greece over the weekend, or possibly some kind of plunge protection activity. The market failed to follow through on Monday, and remains in a clearly declining trend, with support at the 200 day moving average.

- XLF: The financial ETF is hanging onto the 200 day moving average, and is trading near the bottom of a trading range that goes back to August. A break below Friday’s low would provide a signal to short.

Overall, there appears to be poor risk reward both long and short, considering the market is trading bearish but oversold. Here are a few possible long picks in case we get an oversold rally:

- CPTS

- ISRG

- CAGC

I am likely to steer clear of equities, to focus more attention on the forex market. This morning’s weakness in the Dollar and Yen is moving several pairs into support/resistance areas, setting up potential trades.

- CHF/JPY: Bouncing into resistance.

- AUD/JPY: Ditto.

- GBP/USD: Has broken significant support, and is set up for a short entry here.

- GBP/JPY: In the process of breaking key support.

In yesterday’s sector overview I commented that several sectors still appeared technically bullish despite last week’s heavy selling. After today, I don’t see anything that looks bullish on the equity side. Later this evening I will be scanning for short setups, and will try to post them before the open tomorrow.

The forex market is confirming the bearish environment for stocks, as money flows into the US Dollar and Japanese Yen. The Dollar and Yen each broke through important support/resistance levels against other major currencies, promising further strength to come. Check out these currency pairs, and the important technical breaches that occurred today (I will be shorting strength in any of these pairs):

- EUR/JPY actually broke major support last week, and had a major confirming move today.

- AUD/JPY broke down decisively through the 200 day moving average today.

- CHF/JPY looks like EUR/JPY, but a week later.

- AUD/USD found some support at the 200 day moving average, but looks set to head lower.

- GBP/USD looks to be in the process of breaking key support.

Looking at equities, it was selling across the board today. Yesterday I noted the bearish setup FXI. The China ETF sold off today on huge volume, promising more downside to come.

- XLI: Yesterday I said this one was holding up well. Today it is on the verge of falling off a cliff. This looks like a good short below today’s low.

- XLF: Still above the 200 day moving average, but for how long?

I am holding short positions in JPM and PFG, and a long position FXP, all from this morning. For the most part I was caught up trading the forex market, and then kitesurfing. Tomorrow I plan to be more prepared for equity trading, so check back for more short picks. For now, here are the JPM and PFG charts.

A week of sustained, high-volume selling has now been followed a rather lackluster rebound. Looking at the one year chart, we can see price stalling under the 200 day moving average. A closer look at the 30 minute chart shows us short-term resistance near 110.50.

Looking forward, I am expecting a resumption of bearish action toward the end of the week, and will be favoring short trades. However, looking at an overview of sector charts, the signals are quite mixed. While many sector charts remain technically bullish, this market feels like it is being controlled by the sellers. Such an environment can make for dicey trading.

- IWM: The small caps still have higher highs and higher lows in place. I don’t see a good edge in either direction.

- QQQQ took a big dive last week on very heavy volume, and could be shorted on any break of the short-term (3 days) trendline.

- XLF: The financials have been trading sideways since September. Charts for big banks (GS, BAC, MS, JPM, WFC) are generally bearish.

- KRE: Charts for regional banks look much better. Obama seems to be looking for policies to benefit regional banks at the expense of too-big-to-fail. If the broader market falls, however, the entire financial sector will suffer.

- XLY: Consumer discretionary stocks held up relatively well during last week’s selloff. This chart still looks bullish for now.

- XLI: The industrials remain above key support. This chart also looks bullish.

- XLB: The materials sector saw an extremely high volume of selling last week, but the price of XLB remained above key support. The real opportunity to short this ETF will come if price gets below 28.50.

- SLX: Distribution in the steel sector last week, but price remains above key support.

- – OIH: Oil service have remained in a trading range during the past week.

-IYR held up well last week and remains in a bullish orientation.

- EEM: For now the chart looks okay. A break below the 200 day moving average would be quite bearish for the emerging markets ETF.

- FXI: This is a bearish chart, with distribution last week, followed by a weakening rally, with price stalling below the 200 day moving average. I will be looking to short on a break of the short-term (five days) trendline.

- IFN: The Indian ETF has gone nowhere since last May, with price slowly consolidating. I will be looking to short under the 28.00 area.

- EWZ: A break below 65.00 would be bearish for the Brazil ETF.