Equities began the week on solid footing but early gains on Monday quickly evaporated. The S&P 500 closed with a loss for the day and just above the summer lows which is the key level to watch this week. If the index slips below this level the market could begin to pick up momentum on its slide to new lows. In that scenario, the S&P 500 could fall to the 3,500 level or lower.

One catalyst that could lead to such a move is the PCE price index on Friday. The index is expected to accelerate on a core basis in both the month-to-month and YOY comparisons. This data would support the need for another aggressive FOMC interest rate hike and it could come in hotter than expected. While gas prices have come down from their peak the rise in fuel prices and other commodities is still working its way through the economy and is underpinning core consumer-level inflation.