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Afternoon Market Thoughts

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I just got back from my interview with the lovely and talented Rhonda at CNNfn, where we discussed everything from interest rates to the current technical framework of the market.

Let me offer up a few thoughts...

• This is the time to define your time frame when looking at the market. The short-term technicals suggest a market that has largely worked off the overbought condition and is now getting very close to oversold - near-term positive. The intermediate-term work shows a market that is extended above its various moving averages and is overbought while losing momentum -- intermediate-term neutral.

• As Kevin mentioned earlier, I believe that tops are not made on a price but made over time. For example, the market makes a high, consolidates, makes a run at the recent high and fails to break above new resistance. From that point, one should wait for a breakdown or a breakout above the high to determine whether the testing process is a pause in an ongoing trend or is in fact a top. To call that now would be guessing.

• In our view, the market needs to go through this "testing of the recent high" process that, frankly, has just begun. The key to the market moving forward is whether it can relieve the intermediate overbought condition in a constructive way.

• I also think it is important to keep perspective: Just because something stops going up, doesn't mean it has to tank - just ask a plateau!

Bottom line, I expect this little blip higher to continue for a brief period -- but over the next two months, the environment will likely be that of violent rotation from group to group.

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