Chartology: Is Market About To Tumble?

By: Lee Brodie
Producer

Selling dominated on Friday after JPMorgan dashed hopes that consumer credit was on the mend.

Adding to the bearish tone, a survey showed U.S. consumer sentiment was little changed in early January, as worries over income and high unemployment offset news of an improving economy.

Also energy [XLE 59.26 -0.48 (-0.8%) ] and materials [XHB 15.63 -0.31 (-1.94%) ] names were hammered after the dollar [US@DX.1 77.36 0.475 (+0.62%)] made gains against a basket of currencies dragging down commodity prices; lately a stronger dollar has been bearish for the market.

Considering all the catalysts, is the market breaking down? The fundamentals sure seem to point lower but how about the technicals? Seems like a good time to consult the charts with Todd Gordon of Forex.com.

Patterns in the chart of the S&P [.SPX 1136.03 -12.43 (-1.08%) ] suggest to Gordon that stocks are consolidating, and are ready for a pullback.

"Just prior to the breakdown in May 2007 the S&P was trading with 13-handles in any given session. And today we're trading 13-handles in any given session. Markets are complacent and it's a sign for concern."

Also Gordon says trends in the Nasdaq 100 [.NDX 1864.52 -22.00 (-1.17%) ] are bearish too.

But not everyone is negative. Steve Grasso of Stuart Frankel suggests the sell-off could be bullish - especially the sell-off in financials.

"I’m wondering if the bears are getting it all out of the way," Grasso muses on the Fast Money Halftime Report. "They’re selling the financials hard but I think we might see a little bit of a pop next week."

"Remember we have a 3-day weekend and I think investors are getting out of bank stocks because they don’t want to get caught by surprise over the holiday. And the government surprised investors this week with the proposed TARP tax."

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Traderone : When they used a question instead of an affirmation statement as a heading, it means they are not so sure about the direction.