The market was very strong intraday, but then sold off at the end of the close. In the last hour of trading the DOW sold off 50 points. I am starting to see some signs of exhaustion in the banking sector. Take Goldman Sachs (GS) for example. Stock has been very strong since breaking from its descending trend line on January 10th. Once it cleared its 100-dma it looked like a straight shot to the 200-dma at 116. This is exactly what happened today, except it failed to close above the 200-dma. This failure clearly shows that there is intense selling pressure in the $115.50-$116 area. The Directional Movement Index is also near extremes as you can see below. I also still strongly believe Sears Holding Corporation is a great short here. It failed to get above resistance at $43.50 after breaking through this area yesterday. The problem with SHLD is that finding shares to short is extremely difficult. I believe the majority of traders who were heavily short this stock have covered when the stock went from $30-$50 in seven trading days. SHLD could very well make new lows. Technically some would argue that SHLD is developing into a bull flag, but I feel the fundamental issues of SHLD outweigh technical in this specific case.
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The gap between the (DI + and DI –) has not been this high since March 10, 2010 When the Reading was DI + (41) and DI – (9) which = a spread of 32. At this time Goldman was trading in the $170-$180 range. In the two months after this extreme reading was read Goldman fell 40 points and ended up in the $130-$140 range. Currently the spread of (DI + and DI -) is 30. The failure of the 200-dma could be the first sign that Goldman is about to switch directions and head to the downside.