Banks’ bloodbath is spilling over to other areas of the market, but it’s still unclear if it’s going to burry it all.

We’ve been anticipating continued declines from cash-strapped financial institutions who still appear to be figuring out just how deep of a mess the mortgage industry has created for them.

This week’s headlines of lenders Fannie Mae and Freddie Mac becoming insolvent and in need of a government bailout is hopefully something that will lead to a closing of the ordeal. But other lenders probably won’t be so lucky in finding help.

There will be more bad news for the sector. But keep in mind the stock market is forward looking and will likely find some sort of bottom just when everything looks its worst. This could take months though.

And as the banks’ weakness swirls, other areas of the market such as Retail and Technology will also swirl, so we need to be patient buyers to avoid getting flushed during the whole process.

We’re seeing some relative strength from Healthcare as Biotech and Drugs try to gain a foothold on their major averages. We also have some top earners from the group setting up in breakout patterns (as highlighted for subscribers.)

Where Transportation was showing signs as becoming a market leader, it’s succumbed to the downward spiral of the broader market.

Energy stocks have also pulled back some, but their place above major moving averages gives them stronger potential to put in near-term bottoms and resume their rallies.

Oil’s new high if 147 per barrel only adds to the case for Energy stocks. But beware refiners as gas demand tapers off.