Yuck!

Yesterday’s action showed markets are now in pullback mode. Recent highs could not be taken out with sellers now overtaking buyers.  The worst areas are being crushed while the best areas are now pulling back. Shorter-term support levels have been taken out but again, just a pullback right now. Pullbacks are a normal course of business in the market. But…half the market remains bearish with some areas very bearish. This report continues to tell you to avoid:

ENERGY/OIL & GAS- This is self-explanatory as the meltdown continues. Keep in mind, bounces are due at any time but as we said before, they will be random and would not change the major trend.

STEEL, COPPER, ALUMINUM and all that stuff.

METALS/MINING

CONSTRUCTION MINING

COMMODITY COUNTRIES…BRAZIL, RUSSIA…

EMERGING MARKETS

SOLARS

RAILS…which have recently topped…some worse than others.

BLDG/CEMENT

GAMING

HIGH YIELD BONDS- We have told you the most Fed-induced distorted market was junk bonds…and since June…nothing but downside. Much of that has to to with the energy complex but this down move has affected most. Price and yield  are still out of whack…even at these levels.

YEN and EURO…though very due for a bounce.

SMALL CAPS…but we are quite aware of the potential for the “January effect” in where small caps outperform. Watch to see if the Russell 2000 can break above 1192 and then more importantly, 1213.

We wanted to add one other note as we have told you that markets were extended to the upside while at the same time, a big dose of bullishness showed up. On top of this, we are back to seeing a ton of secondaries being issued. Remember, this is more supply on the market and does not happen at bottoms. Something for the file manager.

Keep in mind, there is still plenty that is working…just now in pullback mode.