What to Look for This Week..

Sun 7pm The action Friday looked mildly bullish. Even though the market was essentially flat, the selling seemed to wane a little going into the close. It looked like there was a small group in the market who were starting to say "this selling is ridiculous". There were several valuation measures that were just getting to the point of complete exhaustion.

Just to be clear, I am not saying everything is ok. I am not saying it is time to buy hand-over fist. What I am saying is you need to be careful initiating new short positions here. We are due for a rally, and it could be dramatic. Short positions could get mauled by a crazy short covering rally.

Remember, many times a bear market behaves like a bull market. When we get into strong bull markets, stocks go up for no good reason. In a similar fashion, bear markets can go down because they just go down. I think that's where we are right now.

There isn't a whole lot of news out there that the market isn't expecting. We all know the housing market is weak. We know the economy is weak and consumers are scared. We know the labor market is as weak as it has been in most of our lifetimes. Once the market has fully adjusted to the bleak realities of the economy, it starts to head higher. That is why the market turns before the economy. The market is a leading indicator.

Be careful this coming week. The longer we go lower day after day, the more violent the bear rally could be. Keep all positions small. Be ready to take profits when they come. Be ready to cut losses short. Until next time, stay low risk..