The Dow Transports and the small cap Russell 2000 closed below their respective 200 DMA. These were the 2 important indices that held above this much tracked level all through the Month of May and this could mark another significant breakdown in the US markets.
As long as the Transportation index was holding above its 200 DMA the chances of recovery remained. Now with this move, those chances have gone up in smoke.
The small cap russell is a good measure of risk preference of investors. Once again, with a close below 200 DMA, the risk taking appetite has probably been flushed down the drain.
While Indian markets have been the best performer during the current decline amongst the BRIC countries - this may very well become the reason for a more pronounced sell off, as short sellers start targeting the out-performers.
For those interested, here is what I had said on CNBC this morning: