Sulaman Chaudhry and Andy Cole send: We are going to take a real broad look at the markets tonight, so let’s get started:

We held 824 on the /ES last week as some buyers finally came back into the market and managed to rally up as far as 860 before closing right below 850. While the volume has increased as the market has moved higher, we do not expect this rally to see much more momentum to the upside, especially with that 50-day moving average beginning to roll over again. At the most, we could see a retest of the 50-day average before heading lower again. The news continues to be terrible. Don’t believe us? Check this article out for the latest bloodbath in the financials.

And for anyone that truly believes this so-called stimulus will work, you might need to step outside and look around. Thousands of people are being laid off every day and there is very little that our government can do to stop it. One only needs to read a bit of history on the Great Depression to know that. We recently stumbled on a very informative site that is updated on a daily basis with the most recent layoff numbers in the United States. You can check out Lay-Off Daily here.

The Financial ETF (XLF) finally broke down out of its descending triangle a few weeks ago and now looks to be headed for a retest/possible break of the November lows, with the latter looking more and more likely. Notice the heavy selling volume over the past few days.

Bank of America (BAC) broke to a new low last week after the WSJ reported that the bank needed more capital to prop up the Merrill Lynch acquisition. The selling volume has been tremendously high.

Wells Fargo (WFC) also broke to a new low on heavy selling.

And Citigroup (C) is flirting with new lows as well as initial stages of a breakup begin to take place.

With all of these banks at or near new lows, we expect the XLF to break to new lows sooner rather than later.

The Oil ETF (USO) had a terrific run a few weeks ago, but failed to break out of a downtrend dating all the way back to mid-July. The 50-day was not even tested. This, coupled with the fact that the USO failed to make a higher high leaves us still bearish on oil. As people get laid off from work, they drive less, spend less money at the pump etc. The USO could retest lows here.

And now gold. This has been a fascinating chart as of late. The trade has been to the upside for about three months now, but we are beginning to reach some fairly big resistance levels that will leave traders with some big tug-of-war battles in both directions. However, the fact that the 50-day moving average has swung back to the upside leaves us somewhat bullish. We also have a nice uptrend dating back to late October that has been held three times as buyers came in on heavy volume. If we can see a break above $86, we could be in the early stages of another bull market in gold. And with the way things are going in regards to the global economy, the fundamentals certainly support this trade. Definitely one to keep an eye on.

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