NEAR TERM LOW BUT MAJOR TREND REMAINS DOWN

That was a crappy week but notwithstanding the Middle East really blowing up, we believe Friday’s action potentially puts in a near term low. But caution…in bearish phases, bounces will only last so long. They serve to work off oversold conditions and when they peter out, selling shows up quickly. So shorter term:

For starters, it is a shortened, holiday week…where normally you will see seasonal strength but we are seeing other things.

Apple looks like it had a pretty decent high volume reversal. On top of this, we are now seeing all kinds of reports talking about Apple’s drop…after it was already down 200 points from the high. If Apple rallies up, things will follow to a certain extent.

We are also seeing a few growth names looking like they are going to hold their longer term 200 day averages. We expect them all to eventually break but when they hit this long term average the first time, a bounce usually occurs. Take a gander at names like AMZN, GOOG, EQIX, BIIB and a few others.

The financials also held the 200-day on Friday…the XLF and IYF bounced right off of it.

Finally, we saw the highest put buying since May…after a big drop…indicating that fear is really picking up.

So…odds favor we bounce here…but it is important to recognize that the short term is the trees. The forest is that all major indices are trading not only below the all-important 50 day but the vitally important 200 day average. On top of that, when we do our sector analysis, we are down to a handful of groups that remain in uptrends like HOME IMPROVEMENT RETAIL, HO– USEHOLD APPLIANCES, INSURANCE BROKERS and that’s about it! We can promise you with leadership so thin, there is not going to be a ton of upside on any bounce just yet.

We also want to make sure you know that the new “bs” is the fiscal cliff which we call the fiscal stiff. The new mantra is that when a deal gets done, the market will pop…and everything will be just fine. Careful! The market topped way in advance of all this noise. On top of that, someone will have to explain to us how raising taxes will be good…and again…THERE WILL BE NO SPENDING CUTS!