The Bulls Are Looking Tired: Wall Street Sector Selector Friday Market Outlook (SPY, DIA)

Instratrader Indicators:

Red Flag: We Expect Lower Prices Ahead 
Daily Technical Sentiment Indicators: Optimistic (Bearish)
Short Term Market Condition:  Overbought (short term bearish) 
Short Term Trend: Down 
Medium Term Trend: Down 
Long Term Trend: Down 

Negative action in the U.S. markets and around the world today left me with the distinct impression that the bulls are getting tired. 

On a fundamental basis, the bad news was headlined by that pesky unemployment problem just won’t go away with a rise in weekly claims today, while on the corporate front, Rite Aid and AMD got whacked for not meeting earnings expectations and Blockbuster filed for bankruptcy.  

The Senate decided they didn’t want to deal with the soon to expire “Bush Tax Cuts” until after the election which inserts more than a hint of uncertainty as well as a “ticking clock” into this all important situation. 

Overseas storm clouds continued gathering (yet again) as Ireland is in a confirmed double dip with its 2nd Quarter GDP contracting while Germany’s growth slowed more than expecte 

Finally, battle scarred veteran Paul Volcker summed it all up by saying that “the financial system is broken” and that it is “so difficult to get out of this recession because of the basic disequilibrium in the real economy.” (Mr. Volcker obviously doesn’t watch financial television)

On the technical front, the S&P sliced right back down through the 1130-1135 level that had provided such strong resistance and now was supposed to be support and thus broke the upwards trend line in place since the beginning of the early September rally. 

Today’s close at 1124 leaves the index 8 points above its 200 Day Moving Average, the widely accepted demarcation line of bull and bear markets. 

Internals continue to weaken in terms of breadth, Advance/Decline line, and Up/Down Volume, all indicating lack of strength in the upwards direction.

Tomorrow comes Durable Goods and New Home Sales but looming ever larger next week are some huge reports that we’ll discuss in detail on the weekend report.

For tonight, Wall Street Sector Selector remains in the “Red Flag” mode, expecting lower prices ahead.

Disclosure: SH, SEF, EFZ, VXX, SPY Put Option

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