Happy Monday everyone. Last Friday, the choppiness in the markets continued – but what’s in store this week?

While stocks didn’t drop below Thursday’s lows or the lows of June 16, they showed a great deal of weakness on Friday. The S&P 500 ended the week down 0.24% although the Nasdaq 100 closed the week +1.10%and the Russell 2000 +2.00%.

There are various potentially bullish take-aways from last week but the simple price action remains weak overall. In the bond market the 2 year U.S. Treasury yields hit all-time lows last week and 10-year and 30-year maturities keep marching higher as well. It sure smells like risk aversion is the trade du jour.  Even the VIX on Friday jumped back above 20. The breakout higher in the semiconductor index (SOX) I pointed out earlier last week also failed on Friday, but does remain above the recent lows in June.

The S&P 500 closed more than halfway below Thursday’s potentially bullish candle and seems to want to break lower. I continue to see the next potential downside target of around 1,237 on the S&P 500 should the index close below the 200-day simple moving average on a daily chart.

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As much as I’ve mentioned the banks over recent days, they simply are worth mentioning again as their importance to the overall market remains intact and without them a significant equity rally would be near impossible to imagine.

The KBW Bank Index (BKX) shows persistent weakness and broke out of a bear flag pattern to the downside last Friday.

Goldman Sachs (NYSE: GS), for example is showing similar weakness and is dropping out of a bearish pennant pattern which now brings this stock to its July 2010 lows. Should these levels not hold GS would have significant room to the downside until next support comes into play.

Earlier last week some of the oil services and refiners such as Holly Corp (NYSE: HOC) and Frontier Oil (NYSE: FTO) lead to the upside but on Friday failed miserably. To put this in context, these were stocks with nice technical setups and also otherwise logical rally candidates but the increased volume on which they sold off on Friday clearly signals the difficulties stocks have to move higher.

For a complete technical analysis breakdown of the oil services sector, read “Why Oil Service Stocks Are Tapped Out.”

The bottom line is that investors are nervous. I don’t want to sound too repetitive but we remain in a near-term choppy market that until it gets enough momentum in either direction will remain tricky to navigate. Risk is to be managed with more caution than usual.

And my, if we get a washout below 1,250 on the S&P 500 … I could see a more meaningful rally into July.

• For today’s daily market outlook from Sam Collins, click here.
• To read Sam Collins’ trade of the day, click here.
• For a technical analysis of why oil service stocks are tapped out, click here.