Sellers appear to be gaining the upper hand, as selling gained momentum in the second half of US trading yesterday, and Asian markets sold off overnight. While it is a bit premature to call the end of the rally, given yesterday's volume, a few factors indicate that we may resume our downtrend soon:

- Momentum appears to be shifting. European markets are also lower this morning in early trading.
- Individual chart setups are increasingly favoring short sellers.
- Sentiment seems to have shifted too quickly toward bullishness. Investors have been too hasty in calling a bottom here, as Mish Shedlock discusses in his column Unrelenting Bullishness.
- Overall, the volume of this rally has been rather weak.
- MT earnings disappointed yesterday, prompting a reversal in commodity stocks. Oil also gave up its gains from the previous day, and continued to sell off overnight.
- Many commentators have been wondering whether the credit crisis is contained. Evidence indicates we are not even close to the end, with more writedowns to come, further contraction of credit, deleveraging of the economy, and slowing economic growth. These are synergistic forces, and it is impossible to know how long the cycle will last.

Meredith Whitney was interviewed yesterday on CNBC, and had the following to say (hat tip to Mr. Mortgage for the transcription, which he says is "loosely translated". You can watch the interview here):

We are in a new part of cycle. We have digested the fact that the securitization is not coming back. Securitization made up 85% of mortgages and 50% of credit cards. Market is not coming back. Contraction of capital is one thing. But what happens going forward is contraction of the overall mortgage market - this has never happened before.

Banks are not lending. Originations are down big in Q3. Loan balances getting smaller. Credit cards make up over $2 trillion in available credit lines being pulled out of system. Credit is being taken away from those that got credit in the past 15 years. Never in America had we seen this before. This is a more destructive market for consumer. This is not factored into market.

An economy that has already been impacted by market and unemployment going to double digit levels is another wild card for banks.

Banks just will not make a lot of money and the street is still expecting them to make a lot more money. My estimates are 30-70% below the street and i think I am too high.

In light of these factors, the housing market is likely to continue its descent, prompting still more writedowns and a broader crisis in the CDS market. Go here for last Friday's post on AIG's continued troubles and problems in the credit default swaps market.

Onto the charts. As a very quick qualification to the charts below: we are still technically in an short-term uptrend, and yesterday did not qualify as heavy distribution. I could easily see a scenario where the bulls take us 20% higher from here. I really do not know what is going to happen in the near term. I only offer the charts as potential entries for swing trades. In addition to the short setups below, I will be watching the commodity stocks for potential long entries on pullbacks.

Last night I noted some shorting opportunities in the telecom and wireless sector. Here are some more charts from other sectors, all short. Due to the number of charts, my commentary will be abbreviated.

- EEM gave up amost 13% on slightly increased volume.



- FXI fell back from the apex of the prior symmetrical triangle breakdown, on slightly increased volume.



- RSX: The Russia ETF lost nearly 12% on heavy volume yesterday.



- GMKT



- TRC



- SYMC



- SKT



- PLCE



- ORI



- MBI



- MW



- FAF



- DLR



- CTO



- CPT



- PCU



- PCS



- MCHP



- KALU



- HITT



- ADRE



- CAVM



- CHA



- CHRW