While I would not be surprised to see continued indecision and low-volume buying early in the week, I am preparing for a big price drop for equities and commodities. A few factors to consider:

- Stocks rose very briefly last week on the FNM/FRE takeover news, then quickly moved lower. This is the weakest move we have seen after such significant news of government intervention during the current crisis, indicating the feds are running out of power to put a floor under the market.
- A number of sector charts are technically damaged and running into resistance on decreasing volume.
- Commodities and energy shares got their bounce (predicted in my Thursday post). They may have a bit more room to run, but not much. While I asserted the "commodity bounce may have legs" last weekend, now I think not.
- Emerging market charts look terrible.
- Financials, housing, and consumer discretionary sectors are still high above their July lows and have demonstrated resiliency as commodities, technology, and emerging market shares have plummeted. If financials start to break down with greater conviction (following LEH and MER), it will mean big problems for the broader market. Last week I heard someone say, "The government is not letting the market correctly value the financials," which I thought was an apt statement. It is only a matter of time, and I think sooner rather than later.

On to some charts:

- XLF: Volume patterns indicate many people still want to buy financials, or else there have been too many shorts in the market. This is a house of cards, and simply a matter of time before head down toward the July lows. Watch for a break below 19.70.



- RKH: Regional banks are trying to rally above the 110.00 level. I think this will turn into a failed breakout very soon.



- WB: I post this chart often because of the company fundamentals. This stock is destined to follow LEH and MER. Watch for a break below Thursday's low to start shorting aggressively.