The pattern on the S&P 500 (^SPC) shows a fractal formation of the descending wedge pattern. The upper trendline marked A and the horizontal line A cracked in July and have now been replicated in a further pattern with the downward trendline B and last week’s breakdown below the horizontal based of the wedge also marked B.

Such a pattern suggests that the attempts to turn the tide of the underlying bearish trend are fading.

From a technical perspective it is also significant that the A downtrend line currently sits at the 200-day EMA and the B downtrend line is at the 50-day EMA. Any bounce-back rally following "good news" about the bailout will find both of these levels to be where the bears will pounce.

The hearings on Capitol Hill are absolutely fascinating and show the US at both its best, in terms of its readiness to allow the world in on the airing of such dirty laundry, and at the same the sadness and almost desperation to be seen in the faces of the senators and Paulson and Bernanke.

Someone needs to rescue Henry Paulson as the task appears to be overwhelming him.

Wisely the committee is highly reluctant to give the Treasury Secretary carte blanche authority on a scheme which has an enormous number of unknowns.

The other major concern about this whole process is that the little guy doesn’t like hearing every ten minutes about how critical and fragile the financial system is. It’s also hard to come back for an encore.



The commodity rebound will likely run into stiff resistance at the 34 level on the Rogers International Commodity Index.



The financial sector fund XLF is continuing to fall but on much lighter volume suggesting that the short selling rules are having a noticeable effect.

Warren Buffet’s decision to buy into Goldman Sachs will help to spread the notion that the worst could well be over for the sector.



Many of those funds that used to be active short sellers of banks and financial services companies appear to be shifting their focus to the consumer staples sector as exemplified in the price/volume behavior of XLP.



Sierra Pacific Resources (SRP) should struggle to make it beyond the $10.30 region.



Fording (FDG) looks vulnerable as a pullback effort appears to be in trouble with a clear overhead barrier in place.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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