We open a new quarter with more nausea. In spite of the supposed seasonal strength at the end of a quarter as well as the pre-holiday, markets are suspect. Frankly, that is being nice when looking at China and other countries as they are all gapping down again this morning. Our market had better not start looking like China…AND it really had better not look like countries like Brazil and Turkey. Remember, we never rationalize as to why because normally, markets are a forward looking entity. Just recognize that sellers continue to have a bigger upper hand on a daily basis. We now watch vital longer-term support levels. If taken out, what has been a treacherous market since the end of January will become  a lot worse.

Again, pay attention to price. Do not pay attention to how strong GDP was in the 2nd quarter. Do not pay attention to the talk of strong upcoming earnings. We can assure you markets do get into trouble on the best of news…and do top out on the best of news. One only has to look at machinery and industrials swooning while the economy is strong.

If markets break longer-term support levels, expect us to ramp up the writing as the rest of Wall Street will tell you not to worry. We always write more when things go awry in markets. Keep in mind, longer-term support levels have not been broken. They can still hold. We are just giving a warning shot that deteriorating and narrowing markets are the key signs that leads to these breaks.