The markets ended this week down overall and posted their 5th straight week of losses. The negative action Friday came after a market test and to me, signals significant weakness.

Here’s a look at the weekly chart of the S&P 500:

Here you can see how flat the S&P has been, but I expect that we will see prices slide into a more significant correction.

One of the biggest concerns with the action of the past few months has been the quality of companies leading the rallies. Instead of industry leading companies making big moves, we have been seeing low quality (fundamentally speaking) companies making the biggest gains.

You don’t want that if you are looking for a sustained rally/bull market.

Here’s a look at the daily chart of the S&P 500:

Weakness showed up in the high volume up-day this week and the index has fallen through the trading channel.

Other than moving below the bottom pink line, the S&P has shown further weakness as it has had lower highs and lower lows since the top in the beginning of May.

The next point of support will be just above 1,250 and likely at the 200MA.

Staying in cash is a great idea in a choppy market like we’ve seen but stay posted to see if we find the market in a more significant trend.