One Technical Tip To Keep You Out Of Trouble…

Longer-term, nothing has changed. I just hope you have been listening. There is
a large list why I have remained bearish long-term.

First and foremost, all major averages remain below their declining 200-day
averages. If there is any one technical tip to keep you out of trouble, it is
this one.

Over 80% of all stocks remain in what I consider poor technical shape… and the
list of stocks that are leading continues to be short. To make matters worse, I
cannot find any stocks setting up in sound bases.

WORLD MARKET AVERAGES are worse. REAL
bear markets carry the rest of the world for the ride. Of course, Pakistan was
hot last year. I missed it.

Group charts look like the south end of a north-bound mule. In fact, of the 197
groups that I follow, I believe I can count on one hand the groups that are in
OK shape.

Valuations remain high. Yes, I mentioned valuations. Historically, secular bear
markets like this usually end with price/earnings multiples in the low teens.
Last I looked, we were still in the 20’s and frankly, I don’t think Einstein or
Steven Hawking could figure out some of the earnings that I see.

Strategists refuse to budge. Over 95% of these buzzards remain bullish even
though we are experiencing the worst bear market in 70 years. In my next report,
I will have another story to tell.

That’s all the negatives. I know it’s a lot to swallow. But if you have been
staying in gear with me, you have felt no pain.

Now…time to look at some positives. I bring these up because eventually the
market will go through a bull cycle again. But understand this, when I mean bull
cycle, I am talking about a few months of a rally. This is a secular bear
market…one that lasts years. The best way to describe my thoughts is to look
at the 1966-82 period. During this time, we had a giant bear market with
mini-bull markets. This is the exact opposite of the 1982-2000 period. During
the 1982-2000 period, you had a big bull market with mini-bear markets…most
lasting 6-9 months. The big key for the rallies is to be nimble and when it tops
out, get out of the way.

Let’s start with a lot of my sentiment work.

At the top in early 2000, IPOs were coming out on an assembly line. Quality was
becoming worse and worse. Near the end, companies like WEBVAN…that delivers
food…were valued in the billions. My favorite was BUY.COM. They had a fabulous
business plan. They were going to lose money on purpose but make it back with
the advertising. Three words…”It’s medication time.” At this point
in time, there are no IPOs. That is a positive.

At the top in 2000, stock splits were all over the place. Some splits were 3,4
and 5-1. No stock splits anymore. Oh, except for MICROSOFT’s 2-for-1 numbskull
split.

We are now in the third year of the presidential cycle. For the past 50 years,
the third year has never failed. They have all been up except 1987…which was
basically flat.

All that said, this is a market that has taken all past barometers and shoved
them aside. I gather you recall how everyone said that as soon as the FED
started to lower rates, the market would get going. I gather you recall everyone
saying the market could not be down three years in a row. Well, we are in the
fourth year and the S&P is currently down 7%. Regardless of these
indicators, we will wait on the improvement of the technicals.

Shorter-term…throw a dart. The daily moves are a joke…just all over the map.
I don’t think the market has a chance to rally big-time here…just bounce. The
technicals are just that bad. I do know one thing, if the market breaks the
support of the past few weeks, look out. A break below July/October lows will
make things much worse. I mentioned on a FOX NEWS CHANNEL appearance that you
will then see the DOW in the 6’s. You want to see capitulation? Wait til you see
what happens if the DOW goes into the 6’s.