Weekly Sector Preview (11/17 - 11/21)

By John C. Lee | November 15, 2008 | 8:30 PM | 0 Comments

The uncertainty surrounding GM (NYSE: GM) will not allow this market to begin a powerful rally. There is too much uncertainty and too little time. This uncertainty alone will be able to drive the markets lower. What must be absolutely considered is the fact that we could start another primary leg down. This will be true if the market cannot 1) cancel out Friday’s 4-5% loss on Monday, and 2) break through the 20-day MA within three days. The market must achieve both, or else we will be testing the lows again at which point a breakdown is almost entirely certain. 

5 out of 9 sectors are in the process of forming bearish continuation flags (to the downside). The other 4 are forming symmetrical, ascending, and /or descending triangles. Although these sectors are the strongest, they will stay within a range until a clear direction is determined. Most volume and outlooks are bearish and I wouldn’t give any individual sector a “bullish” outlook given the continued consolidation.

The point is that we can’t hang around in the tight range here at the bottom. This is 100% bearish and will be the precursor to another leg down if #1 and #2 are not accomplished. In this market, each day counts.