ICE GETTING THINNER!

Let’s just add Tuesday’s action to the “ice is getting thinner” category.

We have outlined for you how many names, how many sectors and how many countries are getting in trouble. Under the weight of all this, eventually, the popular indices follow suit.  Remember, we have not had a 10% correction in more than 2 years. 10% corrections are a normal part of market business. They serve an important purpose. They wipe off the smiles of the bulls…they clear the decks for higher prices and for a hard working stock operator, they enable one to decipher the potential leaders for the next move higher. This is done by consistently gauging the relative strength in the market of those companies that have the strongest earnings and revenue growth. Our biggest issue is the boom and bust cycles created by the fed leading to larger than normal moves up…and of course, larger than normal moves down. Remember, the two times the Fed stopped printing money over the past few years, the market went down 17% and 21% respectively. After the 21%, Mr. Bubble went “all in” with his gargantuan $85 billion each month. Let’s hope any move down is contained as finally, an adult is running the Fed and rolling back the maniacal money printing. Small caps are close to 10% already. A 10% correction in the DOW would take you down to approximately 15,300 Dow and S&P 1800. Again, we are not saying this is going to occur. We are saying it is waaaaaaay overdue and have to be on alert as the market’s internals continue to head south.

On the other end, we must take notice as to how strong China is right now. A quick glance at the FXI or the HANG SENG index will show this. Again, we are always on the lookout for relative strength but be rest assured, if our markets suffer more damage, the rest will follow to a certain extent. As usual, day by day!