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A couple days ago, Warren Buffet indicated that he doesn't find many stocks overly attractive despite the decline of the last three years. I thought to myself - hmmm that seems strange to say when buying some high yield paper over recent months. Then it struck me that I forgot about one of the golden rules I learned early in my career; there is a world of difference between a company and a stock. The U.S. economy is filled with some really great companies, but right now when going through the fundamental or technical framework, there are just not a lot of great stocks right now. That could change with a sharp decline in price, or an unexpected surge in earnings - or both. But as some friends of mine remind me as I voice frustration about the markets and at times life; it is what it is - just accept it. Once I accept the tape for what it is, I can plan instead of react.

I was talking to a client yesterday about the mixed and neutral readings in the market and that the only thing to have changed recently was the alleviation of the near-term oversold condition. We were laughing at ourselves because within a very short time period, we have never felt so smart one hour and then so stupid the next hour. That is what can happen in a market where the big boys have made their bets and the aggressive funds are whipping the tape around because no one wants to carry a position in either direction overnight. In other words, the event risk is potentially far greater than the "being right" reward.

So when all the fundamental, and geo-political issues are mixed and neutral at best, what does one look to? St. Maarten (just kidding). For those of us stuck in this market muck, we turn to the technical framework of the market. DRAT - that is also neutral at best (exhibits 1-3). In addition, I try to get direction from scanning individual stock charts in order to make sure that I am not missing something developing underneath the surface of the indices. The individual charts are giving me the same "neutral at best" read. Using a 14-period stochastic indicator, 30% of OEX components are oversold and 23% are overbought. In the NDX, 19% are oversold, while 36% are overbought. These readings confirm the "neutral at best" view.

So what then do we turn to for near-term direction? In such a neutral and mixed environment, I then turn to the primary trend and patterns that are within that trend. Clearly, the trend since the first week of January has been down. It is important to remember that nothing goes up or down in a straight line. The market is currently in a fairly typical consolidation pattern called a pennant. Basically, it means that the volatility after a significant move shrinks, as traders get more and more anxious about the next move. This pattern is also know as a "continuation pattern," which means once it is over, the index or stock continues the direction it was in before the consolidation started. Unfortunately, as we all know that direction was down. Watch for this pattern to resolve itself.

Exhibit 1 - Stochastics are neutral and hooked lower despite gain yesterday

Exhibit 2 - Can't get more neutral than this in MACD

Exhibit 3 - SHOCKER! Same holds true for the RSI

Exhibit 4 - Market appears poised to come out of consolidation pattern soon.

Every time I feel stressed, I imagine the stress of a soldier sitting in Kuwait wondering if, when, how and Iraqi response. I have "high class" problems
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