MARKET WEAKNESS SPREADS TO FINANCIALS - BROKER INDEX BREAKS KEY SUPPORT

BROKERS/DEALER INDEX (XBD) BREAKS KEY SUPPORT... Financial stocks appear to be following in the foot steps of the major averages (see earlier update), which warrants near term caution. Chart #1 shows the Broker/Dealer index (XBD) breaking its 50 & 200-day moving averages on a closing basis, which doesn't bode well for the market. Broker, Charles Schwab (chart #2) fell below its 50-day support on heavy volume and is currently challenging its 200-day moving average. Since brokers and bankers usually trade together, this breakdown in Brokers warrants watching the Bank index (BKX)(see chart #3) as it tests its 50-day support level. Other financial stocks that sold off today are Citigoup(C) and American Express (AXP). AXP (chart #4) looks similar to the XBD and has closed below its 50 & 200-day moving averages.

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MAJOR MARKET INDEXES BREAK BELOW 50-DAY AVERAGE... All the major stock indexes closed decisively beneath their 50-day moving averages. The NYSE Composite chart shows that index dropping for a test of its December low. The Dow, the Nasdaq, and the S&P 500 look pretty much the same. The only positive factor today was relatively light trading volume. Even so, the market has now gone on the defensive. The daily MACD have also turned negative. [For more charts, please see today's midday update]. Bond prices attracted some safe-haven buying. Higher oil prices may also account for today's unusually large drop in transportations shares -- led down by the airlines, which were especially weak.

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