Markets sold off harder last week than expected.

S&P 500 Market Momentum:
Short term: Slightly Up over the early part of this week
Intermediate Term: Negative/ Short

Short Term Sentiment
Short term sentiment has moved into the firmly pessimistic territory and can be reviewed here. Paradoxically, this is slightly bullish for the markets.


Week Ahead Forecast
We expect a small move up /sideways consolidation over the coming days. However, the longer and intermediate trend remains decidedly bearish.

I am looking to unload long positions if the market trades higher and establishing short positions for the next wave down.

Sector Reviews
Energy - XLE $86.26
Short term and Intermediate term indicators are bearish for Energy. While we've been waiting for the topping call on Oil, the markets may have been waiting for Memorial Day driving weekend to pass before dropping the price of Oil. Oil is in a bubble as are other Commodities, but it has been tough to slay the beast and we'd look for confirmation of a turn before taking aggressive positions.

Technology - QQQQ $48.20
Nasdaq is in a bullish short term pattern over the next few days, but the intermediate term forecast is negative. With technology taking over leadership of the market, the QLD is a good play on Tuesday if the market gaps down on the open.

Consumer Discretionary - XLY $31.70
Consumer Discretionary sector is much weaker than the market currently. Rightly so, as Wall Street is recognizing how terrible the situation is for the consumer. We will be looking to short this sector once short term technical indicators roll over.

Financials XLF $24.65, SKF $112.95
Financials were battered last week and are in severely over sold status. Look for a bounce in stocks like AIG, Merrill, Lehman, Goldman, Fannie, Citi etc. However, we expect the bounce to be shortlived and will be looking for short entry positions for a new leg down coming soon.

Stocks
Home Depot $26.77 - Short position - look for entry.
We are looking for a bounce in the stock to enter a short position this week. Entry point is looking to be in the $28 range. If available, HD is about to embark on a relatively strong leg down over the coming weeks. Fundamentally, housing continues to be weak, inventories are building and the incentive for an uptick in building supplies does not look likely anytime this year.

Goldman Sachs GS $172.30, Merrill Lynch MER $43.36 - look for entry.
Look for a bounce in the financials early this week as they are in solidly oversold status in the very short term. Intermediate term, we are bearish and will be looking for shorting opportunities.