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.