Lately, I have been writing about all the negative divergences and how there are fewer and fewer leading stocks out there.  Today, I saw another red flag in the market.  With all of this evidence, I believe that we might be in a topping process.  Here is a quote from Gary Kaltbaum about the topping process.

Tops take time. Tops do not occur in a day. Tops follow a pattern where one by one, areas of the market roll over, leading to major averages following suit. So… pay attention. Early warning signs are there. I just don’t think the end is here yet…

The red flag I saw was the financial stocks.  Here are a few notes.

(GS: 152.58 +5.38) – This stock has totally rolled over.  It has broken the 50 day moving average and might go test the 200 day moving average (~$147).

(BAC: 14.03 +0.04) – This stock tried to get above the 50 day moving average today and failed on huge volume.

(WFC: 27.69 -0.38) – This stock sold down hard today on increased volume.  This one is also below its 50 day moving average.  This stock was down 3.5% today

(BK: 25.26 -0.03) – This stock rallied into the 50 day moving average and failed again today.

If the financial stocks have topped out, this might be a very ominous sign for the overall market.  I am not saying we will crash tomorrow, but going back to 2007 guess which sector topped out first?  That is right – the financials.

Here are some closing comments from IBD.

It was an ugly finish to what had been shaping up as a humdrum session.

The major indexes dropped sharply late Thursday, undoing the Nasdaq’s modest gain and slapping a distribution day on the other major indexes.

A distribution day involves a significant percentage loss in rising volume. It suggests institutional selling.

Even before the late slide, there were disappointing signs.

As it has happened in recent weeks, the Nasdaq crossed the 2200 level only to be kicked back down almost immediately.

That resistance appears to be firmly established. It’s hard to imagine the market making much progress until that resistance is broken and turned into support.

The NYSE indexes waged a separate battle Thursday. They spent most of the day bobbing over and under the break-even point.

The indexes have been struggling to break free from a mire they’ve been stuck in since mid-November. There’s been an absence of boldness in price and volume action in either direction.