Nothing Is Written In Stone
Nothing is written in stone when
it comes to the market. It is going to do whatever it wants to do
regardless of what you or I think. When I have
an interpretation of the market, it certainly does not mean the market
will oblige me. But if you follow this column,
it should be obvious that reading
chart patterns does work. Yes, I know you have been hypnotized by many
pundits who say you can’t time the market and reading charts is laughable.
They say to just think long term. They say that if you miss the ten
best days of the market, you miss too much. Well, it is my contention
that these people just do not know how to read
the markets nor are they willing
to spend the time to learn. After all, it is hard work. Don’t get caught
up by these people. Teach yourself how to read the markets.
There are times when the market is in a trading range
where I don’t have much to say,
and then there are times like last Monday…where I see a definitive
trend change. Nothing I have seen in the last
week leads me to change that stance.
The market topped on 8/22. A bear market rally can only go so far. I
suggest that any rally from here will not take
the market back to those highs.
More importantly, I believe odds favor more retesting. No, I did not
say back to the July lows, but there are a few
numbers you need to know. If at any
time the Dow closes below 8558 combined with an S&P 500 close below 903
and a Nasdaq close below 1295, what has been a
somewhat controlled correction will
turn into something much worse.
I am still worried here for several reasons:
- All major indices remain well below their 200-day
averages. Most sectors are in
the same shape. - World market averages continue to go along for the
ride. - Breakouts continue to fail en masse.
- Bullish advisors skyrocketed all the way up to 45.7%,
while bears plunged. After
the carnage that has been done during this bear market, this wrong-way
crowd continues to get it wrong. - September is here. September, simply, is one of the
worst months of the year.
This could possibly fit in perfectly with the fact that the technical
condition of the market is starting to
deteriorate here. - The latest rally had the exact same characteristics of
prior bear market rallies.
That leads me to some potential good news. I use the word
“potential” because I
never anticipate. While I believe you must be defensive right now, any
retest could give the market a chance for a
successful retest. I say this because
the market has a history of putting in double bottoms to end legs of
a bear market. It is also important to note
that many intermediate-term rallies
started off in October. BUT…let’s get there first…let’s see how
we get there…and then react. Plenty of time
before we have to think about it.
Let’s deal with this week first.
As far as sectors, not much to excited about on the long
side. I am seeing good action in
SMALLER BANKS, REITs, GOLD
and no kidding…ALCOHOLIC
BEVERAGES…specifically
BEER. Hey…it’s football season…and after the
last couple of years in this market
environment, it is quite understandable why.