BANKS KEEP BULLS IN CHECK -- INFORMATION TECHNOLOGY SECTOR OVERTAKES FINANCIAL SECTOR -- S&P 500 SECTOR WEIGHTINGS -- THE 200-DAY FLEXES ITS MUSCLE

BANKS WEIGH ON MARKET... Today's Market Message was written by Arthur Hill. John Murphy will return tomorrow. - Editor

Banks kept the stock market in check on Wednesday as the Regional Bank HOLDRS (RKH) declined over 1%. Chart 1 shows RKH meeting resistance at the 200-day moving average and peaking in early May. With a sharp decline over the last four weeks, the ETF broke the lower trend line of a triangle consolidation. This consolidation pretty much covers the entire year and the break affirms the overall downtrend. Within the group, Fifth Third (FITB) and Wachovia (WB) hit new 52-week lows on Wednesday. These stocks may seem oversold and ripe for a rally, but the downtrends are strong and these stocks will most likely require a long basing period before they can mount a sustainable advance.

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TECH OVERTAKES FINANCE... For the first time since 2002, information technology surpassed finance as the biggest sector in the S&P 500. Information technology now accounts for around 16.55% of the S&P 500, while finance weighs in around 16.05%. With today's weakness in finance, this weighting is likely to drop again today. A combination of weakness in finance and a recovery in technology produced the changing of the guard. Chart 4 shows the Financials SPDR (XLF) and the Technology SPDR (XLK) since 2002. Both advanced sharply from late 2002 to early 2007. Change began in the first half of 2002 when the Financials SPDR stalled and underperformed the broader market. Relative weakness turned to absolute weakness when the Financials SPDR unraveled in the second of 2007. The Technology SPDR also declined, but the loss was not nearly as dramatic.

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PERFORMANCE PARITY FOR XLK AND XLF... Chart 5 shows a performance chart for the Financials SPDR (red) and Technology SPDR (black) since 2002. Techs bore the brunt of selling pressure in 2002 as the performance line went deep into the red (negative). It was not until April 2007 that the performance line moved back into positive territory. Finance was also weak in 2002, but not as weak and this sector was quicker to recover. The performance line for finance turned positive in late 2003 and positive performance accelerated throughout 2005 and 2006 (yellow area). This acceleration was wiped out over the last 10 months as XLF performance moved back to parity with XLK.

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S&P 500 SECTOR WEIGHTINGS... The sector SPDRs do not exactly match up with the sectors assigned to the S&P 500 by Standard & Poor's. There are nine sector SPDRs, but the Standard & Poor's lists 10 sectors in the S&P 500. Telecommunications is the extra sector. Below is a table showing these ten sectors with the weightings from the Standard & Poor's website. The big surprise here? The materials sector only accounts for 3.68% of the S&P 500.

RESISTANCE AT THE 200-DAY... John Murphy weighed in on the S&P 500 and its failure at the 200-day moving average on Tuesday. This is even more significant because a number of major indices failed at their 200-day moving averages over the last few weeks. These include the Dow Industrials, Nasdaq, NY Composite and Russell 2000. Throw in the S&P 500 and we have the "Who's Who" of the major indices.

Chart 6 shows the S&P 500 failing at the 200-day moving average in May 2008 and Chart 7 shows the S&P 500 failing at the 200-day moving average in November 2000. The 2000 decline knocked off 13% in 7-8 weeks, while the 2007-2008 decline sliced off around 19% in about 5 months. Even though the length and duration are different, the charts have similar characteristics. In addition to the 200-day moving average, two other chart features confirm resistance. First, broken support turned into resistance (green arrow). Second, the Retracement Indicator shows resistance around the 50-62% retracements (yellow area). Taken together, there is a pretty strong case for resistance around 1425-1450 in the S&P 500. Techs broke the market's back in 2000 and finance broke the market's back in 2007.

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