Trading is mixed in the Treasury markets overnight. Bonds and Notes have been trading on both sides of the market. The recent surge in prices in both of these instruments in the face of increased supply was probably due to end-of-the-quarter position adjustments. This means the current rally may be short-lived.

Equity markets surged to the upside yesterday after early morning weakness then the market died. Volume and volatility were both light as traders lacked the conviction to take these markets higher. Fundamentally, investors are looking ahead to the U.S. Unemployment Report on July 2nd as well as the U.S. market holiday on July 3rd. Both of these events are keeping most traders on the sidelines. The beginning of earnings season next week is also curtailing demand for equities at this time.
Equity markets are going to finish the quarter with huge percentage gains. It is doubtful that these markets will be able to maintain the pace of these gains during this quarter without first going through a normal correction.

If you use the September E-mini S&P 500 as your indicator then you should be watching for a possible secondary lower top formation. The completion of this type of pattern will be a sign that this market is getting ready to rollover to the downside.

There are two scenarios developing for which traders should be watching. The first is the overnight market pattern. The Main Range is 953.00 to 884.25. This creates a retracement range at 918.75 to 926.75. The second is the day session pattern. The Main Range is 952.75 to 884.25. This range creates a retracement zone at 918.50 to 926.50.

Combining the two charts creates a key resistance price at 926.50 to 926.75. Watch how the market reacts at these prices. If this market cannot penetrate this resistance zone then look for the start of a decline. The first downside target will be 913.50. A close under this price will put the market lower for the month and form a monthly closing price reversal top which is often a very bearish signal.