Stock Market Looks Sick

Since our last update on the 3rd, the Dow has moved swiftly down, nearly 300 points, and the SPX about 27 points at todays low.  Last Friday marked one of the largest down days in the markets in over a year, even larger than the January lows and March lows.  The troubling part of last Friday's action was the volume in which the markets went lower and with the relentless selling that was going on within the market.  There were no substantial retracements intraday and today's small retracement showed just how weak the bulls were.  This was true distribution and another indication that the rally from the March lows was corrective in nature, a bear market rally!

I continue to beileve that one should expect all surprises to come on the downside here.  The banking sector continues to falter and show no signs of life.  Other than the fact that most of the bank stocks are back at their March lows or even lower, momentum continues to show further downside action around the corner.  I have yet to see any divergences that will put me on guard for a more substantial rally in this sector.  LEH, MER, JPM, WB, and a whole slew of other bank stocks continue to look weak and vulnerable for futher losses. My post on the bank stocks back on June 3 was dead on.

When we take a look at the intraday picture of the Dow, the trend continues to remain down on all timeframes, intraday, daily, weekly and monthly.

The daily picture suggests support at our next downside target of 12000 to 12100.

Let's take a look at the SPY (SP 500 Spiders); as you can see below, the market should continue to work its way down to lower targets, approx. 1340 on S&P 500 index.

The next two charts are ominous and indicate that the uptrend started at the March 2003 lows is now over and a larger scale bear market is in play.  I had to split the charts up into two images due to space issues.