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First, I would like to fulfill a promise. Yesterday I had the pleasure of going into my son's kindergarten class to read the children a book. For those of us who are overly stressed out staring at the computer - I highly recommend it as therapy. We read "The Little Puppy" and everyone (especially me) loved it. You have a great class Mrs. Klein and the children are wonderful, although I may be a little biased.

Now back to the markets. As I sat home last night and pondered my thesis on the financial markets, I reread yesterday's piece and looked at the charts. Clearly, the technical backdrop hasn't changed for the better, but according to most near-term indicators I follow - it has changed for the worse. The markets are no longer near-term oversold and have yet to reach levels that have been a sign of a pending turn. Until that happens, absent any change in the fundamental and geo-political backdrop, it makes sense to not be overly exposed to equities and wait for further signs of an imminent turn.

While I use the market indices in the charts, that is not enough for me. I think it is important to go through the charts of the individual components that make up the widely followed indices in order to make sure there isn't a change developing underneath the closely tracked and oft quoted indices. I have to remember that change is a process and not an event, and the signs of it coming emerge if one is looking for them.

Unfortunately, I have to report that there was no sign of something positive developing. The only daily charts that caught my interest were some energy names and even they weren't that enticing. What I found interesting is the defensive (not defense) stocks you would expect to act well in an uncertain economic environment because of their predictable growth act very poorly and is still not very cheap. The Brewers are poised to breakdown and the Beverage stocks have already broken down.

The individual charts reinforced the view that the current decline isn't coming from overly aggressive selling, but is derived from very little buying interest. It is pretty tough to drum up that interest when the fundamental and technical backdrop is not compelling, coupled with a geo-political environment that remains nowhere near resolution - even after the first bomb drops.

A few weeks ago when people thought a military move was imminent, I put out there that the greatest surprise could be that the event comes and no one knows what to do with it. That remains my view, but the lead up suggests the same. The event is coming and no one seems to want to game it. The mixed action in the market makes it apparent that traders or investors know how to position ahead of the event. It does seem like there is a tone of "wait until the market moves lower and then we can buy on the news." That isn't how intermediate-term bottoms are made in bear markets because that suggests optimism, not pessimism. When traders are pressing the down tape because "it can only get worse" is when a true washout takes place. In order to have that "war spike" so many are hoping for, you need everyone to be caught short. That was the case in early 1991 and is certainly not the case right now.

I will continue to look for those early signs of a turn that have yet to emerge. Until then I will also try to find new and interesting ways to discuss an environment that has yet to change for the better. The good new is that it will and when it does, the new environment should be a humdinger.
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Have a great day Minyans
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