The Odds Favor This…

So…here is the thought. The Dow and S&P are now at very important
support. I have outlined the 8250 – 8300 and the 870 levels that have to be
watched. The scenario in my mind is a bounce about right here. After all, just
on a price basis, the market is way oversold. This time, I am skeptical
whether the Dow can get above 8550 and S&P 900…areas of resistance. If in
fact they can’t, I then expect the market to roll back over and then finally
penetrate support. Then, all h— can potentially break loose. As I said in
my
last report, it does not mean we drop to the October lows…but with no
support, it won’t take much. Do I hear waterfall?

That is what I said in Thursday morning’s report…but  I must say, I am amazed that the break of support came so quickly. I
actually thought the market would bounce for a couple of more days…not just
one day. Sooo…now that support on the DOW and S&P has been broken…now
what?

First off, from just a short-term point of view, it doesn’t take a genius to
figure out that the market is getting oversold here…so I wouldn’t doubt that
a bounce happens. But…and this is a big but, I would be selling or shorting
any bounce into resistance. That lies in stark contrast to the action off of
the October lows. But oversold does not mean a bounce does happen. We will
just have to wait and see.

The big key is simple. If the Nasdaq breaks and the other major indices cannot
get back above the levels they broke down from, than all the support that has
held up the market for the past 14-plus weeks, will then become
resistance….meaning 8200 DOW, 870 S&P and NASDAQ 1320-27 become an area that
the market will have a tough time penetrating on the upside…at least in the
short term…and possibly in the intermediate-term. 

A few other notes:

Yes, the VIX finally broke out, but still sits at 36. A turn in the market has occurred in the past year when it reaches 50…meaning lower prices will be
needed. The VXN has hardly budged…which probably means more woes for the
Nasdaq. PUT/CALLS  have moved up a bit, but still remain below 1, which would
signify a bit of panic on the investor’s part.

I have been saying to go slow in this market for more than two years. I want you
to really go slow now. There is no reason to be heavily invested on the long
side at this second. There are NO breakouts…There is
VERY LITTLE in the way of
constructive bases…GOLD continues to do well (not a good sign for equity
markets)…VALUATIONS are still ridiculously high for a bear market…WORLD
MARKETS are still going along for the ride…in fact, the
LONDON FTSE is now
below October lows…BUCKETHEAD STRATEGISTS remain defiantly bullish and some
like a certain lady by the name of Abbey, are actually blaming the investor for
being too shy…TALK OF WAR pervades the air…and finally,
THE MARKETS
break support.

Of course, anything can happen. If things change, I will let you know, but odds
right now favor a further drop. The market does not have to go all the way to
the July and October lows, but I would not rule out 7500 and 800 for the DOW and
S&P, respectively.

If you had to be long, I am still finding good charts in lower-priced
WIRELESS and TELCOM. Other sectors that are still in decent shape are
BIOTECH…but I
expect this one will get whacked eventually, GOLD,
INTERNET…yes…INTERNET…and not much more. On the negative side of the
equation, well, I don’t have enough ink to list them.

Oh yeah…and who gave you the Bucs in the Super Bowl? I hoped you cashed in.