IS IT JANUARY ALREADY?

Even though the DOW was up 70 yesterday,

Advance/declines were horrid.

New yearly lows picked up markedly with another 1,000+ names just above new yearly lows.

TRANSPORTS, SMALL CAPS, MID CAPS, RETAIL, REGIONAL BANKS, THE BIG BANKS and a slew of OTHER AREAS finished at either closing lows or new yearly lows. We cannot begin to tell you how negative this is. Just remember, our “top of the market” call in early October was based on two things: 1) Underneath the surface, many countries, stocks and sectors were already in bearish phases. 2) Major indices always follow as the weight of the weakness takes everything down. We are very worried that the weight of the weakness will again lead down…and this time, major, major, major support is in the cross hairs.

We told you many weeks ago that markets were telegraphing slowdowns if not outright recession in many areas. We are getting it. Germany, the engine of Europe and Japan contract. Our GDP expectations have been coming down quickly. The numbers out of China continue to decelerate. Even China cannot lie about their numbers. All this going on with continued easy money and a Fed that has already pivoted away from their stance on raising rates. We are 99.9% sure that they must raise rates next week just for credibility sake but will now start talking risks becoming more elevated…thus THE LAST RATE HIKE.

Since all the recent gaps to the upside failed, maybe today’s gap to the downside AGAIN washes out sellers. But this time down, many stocks and many areas are leading the indices. AND ALL THIS IS HAPPENING IN DECEMBER. We were in hopes that the seasonal strength of December would at least hold things up. We thought that when the next leg down occurs, it would occur in January. We are not so sure any more. If or when the lows are taken out for the majors, you will be finally hearing what the average stock is already in, a bear market as the talk of the 20% magic number will come into play. It will be the small caps that hit it first.

If the lows are taken out, we worry that the big institutions will see it, know it and react to it. You know what happens next. But don’t worry, new records in budget deficits do not matter and now the charlatans in Washington who continue to screw and disrespect the tax payer, are wanting earmarks again.