Stock markets are on the retreat once more this week, after failing to hold above key technical resistance levels. Selling has been across the board from small-caps to large-caps to technology.

 But for those of you who have followed my commentary, the recent failure of the NASDAQ to hold above resistance at 2100 and the subsequent decline should not have come as a surprise.

 I pointed out the fact that the markets were showing a negative divergence during the recent rally. By this I mean the rally in stocks was not supported by rising volume, which was concerning to me. The failure to attract increased buying on up days reflected a lack of market confidence. When the mass market doesn't buy into the rally, you have to question its sustainability.

 Take for example June 23 and 24, when the NASDAQ fell nearly 40 points or 2%. We saw increased selling, while over two billion shares traded, which is a bearish sign. Moreover, from June 13 to June 24, the NASDAQ finished higher in seven of the 10 sessions but the cumulative loss was 16 points.

 On the blue-chip side, recent selling has been intense. The DOW recorded two straight triple digit losses on June 23 and 24, when the index fell a combined 290 points to below support at 10,400. The DOW breached support at 10,300 on Monday.

 The reality is that the current market climate is on edge. Any unexpected shock could be devastating to stocks, specifically in the tech and growth arenas. The failure of the NASDAQ to hold at 2100, which was broken on June 22 for the first time since February 1, reflects the strong selling at 2100.

 Driving the selling has not only been the valuation concerns, but also the threat of higher interest rates, slower earnings growth, and the renewed strength in oil, which cracked $60 a barrel.

 On the tech front, the daily new-high/new-low ratio (NHNL) for the NASDAQ has been showing some positive signs, but the recent rallies have been weak, with 114 of the 119 readings this year below 5.0. Moreover, 49 of the last 75 sessions were below 1.0, but 25 of the last 27 sessions were above 1.0, suggesting increased optimism towards tech and growth stocks. But don't get too giddy; the numbers are still quite low.

 The near-term signals are bearish, and the Relative Strength is quite weak, suggesting the potential for more selling pressure ahead.

 Breadth, as indicated by the advance-decline line (A/D), fell for the five-day period to June 27, declining below 1.0 to 0.80. The five-day MA is below the 10-day and 30-day MA of 1.02 and 1.16, respectively, as well as the 200-day MA of 1.11.

 The index also broke below its 20-day MA of 2077. But the index remains above its 200-day and 100-day MA of 2029 and 2024, respectively. Failure to trend higher could see another downside move back to support at the aforementioned moving averages.

 The CBOE NASDAQ Volatility Index or VXN--a barometer of near-term market volatility based on NASDAQ 100 index option prices--is generally viewed as a contrarian indicator.

 A high VXN indicates maximum fear and a possible market bottom. A low VXN indicates reduced apprehension and a possible market top.

 The 5-day VXN to June 27 fell to 14.71, below the 30-day MA of 15.69m as well as the 50-day and 200-day MA of 17.00 and 18.51, respectively. This may indicate a market top.

 Going forward, I expect trading to remain sideways and largely confined between support at 2000 and resistance at 2100, unless we see a major shock to the market.