The market correction continues. Stocks are lower across the board and across the globe. Today's decline in the S&P 500 is a technical breakdown from its head-and-shoulders formation. Recent comments and forecasts for a slower economic recovery might be considered a reality check for the market. Oil and financials are leading the market lower. Traders are growing apprehensive above second quarter earnings, which officially begin tonight.

Japan led the sell-off in Asia overnight. The Japanese NIKKEI index marked its sixth loss in a row with a 2.3% decline. The Hong Kong Hang Seng gave up 0.8%. The Chinese Shanghai index lost 0.28%. Most of the European markets posted their fifth loss in a row. The German DAX slipped 0.5%. The English FTSE fell 1.1% and the French CAC-40 dropped 1.2%. Meanwhile in Italy the G8 nations begin a three-day economic summit.

Crude oil remains in the spotlight as the commodity continues to crash. Oil futures have fallen more than 17% from their recent highs at $73.00 a barrel. The IMF report this morning contributed to oil's decline. The International Monetary Fund adjusted their global forecast for 2010 and now expects the world economy to grow +2.5% in 2010 compared to previous forecast for +1.9%. Unfortunately, IMF forecasters were cautious and called the coming recovery a very fragile one and expect energy demand to lag.

The sell-off in oil was also fueled by comments out of OPEC, who now claims that oil demand has fallen so much that it could three or four years before global demand reaches 2008 levels again. It makes sense. We're going to have a jobless economic recovery. Unemployed workers drive less and unemployment is expected to rise for the next several months both here in the U.S. and in Europe. It will take years before we create enough jobs to get back to "normal".

Also contributing to the weakness in oil was the weekly inventory data. The Department of Energy said crude oil inventories fell 2.9 million barrels compared to an estimate for a drop of 3.2 million barrels. Meanwhile supplies of gasoline and other distillates are near 24-year highs.

Second quarter earnings season is the huge black cloud currently hovering over Wall Street. I'm sure you've heard it a dozen times already but Dow-component Alcoa (AA) kicks things off tonight. Analysts are expecting another quarterly loss. The materials sector and the energy sector are both expected to see huge earnings declines from a year ago. The earnings parade doesn't really start to hit its stride until next week.

Currently the S&P 500 index is down about 1% near 872, which is a bearish breakdown under support at the 880 level. This also happens to be a breakdown under the neckline to a bearish head-and-shoulders pattern. This technical pattern is now forecasting a drop toward the 810-800 zone. The NASDAQ composite is off 0.6% at 1734. The 1700 level might offer some support but the 1670 level looks like a better area to find support. The Dow industrials are down 0.5% at 8116. The next level of support appears to be the 8000 level and its 100-dma. The small cap Russell 2000 index is off 1.7% and breaking down under its 200-dma.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

A quick review of the play list reveals that ACL has hit our stop but that's not surprising given the action in the S&P 500. Actually several of our bullish plays have been stopped out after we raised our stops last night over concerns that the S&P 500 would breakdown. Looking at the put plays we see that AGU is off another 2.7%. AZO is showing relative strength and actually up 2.2% and rising above short-term resistance at $154.00. Oil services stock CLB has hit our first target at $80.25. CMP is down 3%. FCX has broken down under round-number support at $45.00 but is now testing its 100-dma. MET is off more than 4% and breaking down under its 100-dma. Gambling stock WYNN has broken down through support at $30.00 and hit our first target in the process.