Markets are at a critical juncture here. While I think it is premature to think the rise off the 2002 lows and recent August 2007 lows is over with, there are weaknesses in so many sectors the market may have trouble levitating into the end of the year.
Weakness:
Banks
Brokers
Semiconductors
Retailers
Transports
The bulls need to believe we are in a complex correction off the October highs on the major indices that will eventually form some kind of bull flag, bullish pennant, or bullish falling wedge.
If we do not hold those bullish formations, the rally is over, and we are headed for tough times.
I still favor the bullish outcome here and am still positive overall on the markets going into Dec. 10-15. However, there is enough nastiness in the various charts to temper my expectations a bit here.
Bulls need to hope Cisco lifts us next week. I think they may, as Max Pain on the SPY is about 1535 SPX. However, Max Pain on the QQQQ is 53, which is about 40 NDX points lower than we are right now.
Some patterns I'm seeing suggest a drop into next week, a strong move into Thanksgiving, a slight drop and re-test of that high, then a drop from early Dec into late Dec, a re-test in early Jan, then an all-out dump. We'll see if anything like this transpires. It's all predicated on a bullish outcome to this drop.
