Russell 2000, the weakest area…hit the 1080 area for the 4th time in the past year and held on a decent size reversal day.

The S&P held the 150 day moving average for the umpteenth time over the past 13 months and had a decent size reversal day.

That’s your near-term low.

What does near-term mean? It means as long as these levels hold, good. If they ever give way, then a much much much more meaningful correction will take place.

This does not change everything discussed here over recent weeks and months. The internals have headed south meaningfully.

We have been asked whether we believe the election has any play into the markets and that the powers that be will do everything to keep markets from whithering away. We never used to believe these people were involved but after what we found out on 07 and what we have seen out of this politicized Fed, the answer is yes. But that thought does not matter. Just pay attention to the bouncing ball.


Over the weekend, we finished our report with these words:

“Simply put, if the large cap areas start breaking the 50 day average, that would be the next shot across the bow as it would tell us the big boys are following suit. We started to get some of that last week but Friday’s action had support being held…FOR NOW! The DOW,S&P,NASDAQ,NDX and TRANSPORTS are just a smidge above and are to be watched closely as we head into October. We are also watching the BIOTECHS, SEMIS and the FINANCIALS as they have acted best and held best on any pullbacks. If they go, we suspect market goes.”

Unfortunately, our worst fears are coming to fruition as all the major indices have broken below their first important line of support. This also includes the BIOTECHS,SEMIS and FINANCIALS!

We hold any further comment because we suspect we are going to get some random, all-over-the-place action…but leave no doubt, the market is in corrective mode, foreshadowed by the small caps and all the divergences we have discussed. At this juncture, we take it one day at a time but will leave you with one other thought. Except for the permabears, I have seen no one discussing the possibility of even a 10% correction in the popular indices, let alone…dare I say a bear market. Hmmm!