The good news is that the S&P 500 managed to close out the month of August above support at 1202 ($119.62 for the SPY S&P 500 ETF). The bad news is that the first two days of September have seen the market slice back through that support level. The charts at this point look bad and the daily chart looks like the market will at least go back and test the August lows.

At this point I’m keeping lots of cash on hand until we see how this plays out. Looking at the German DAX it’s very possible that Europe is going to continue to drag us lower. Our financials are once again taking a beating and it seems there is no catalyst in sight that could turn them around.

When everyone comes back after Labor Day it’s going to be interesting to see if they are ready to buy or if they will continue to take off risk. If they take a look at the charts on Tuesday morning, they won’t like what they see.

For now it’s just to wait for more market direction. Many people are talking about a retest of the August lows as being the ultimate downside risk but unless we can stop penetrating the 1200 level on the downside, this market is on life support.