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Emptying Out

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I'll confess it straight up, that's a grim headline. But remember, I'm still in glass half-empty mode, so forgive the hyperbolic grandstanding. "Emptying out" is a gambling term. It's like going all in with buried aces in Texas Hold'em with two more facing you on the flop. It's what you want to do when you find a "sure thing" in the 7th at Saratoga. You "empty out."

Whether it's a sure trade in the market, or a sure thing at Saratoga, pros rarely empty out. There's no margin for error on the empty out trade, and for every legendary winner there are a thousand losers. I once knew a guy at the track, whose minimum bankroll unit was seemingly an empty out unit. Consequently, he fluctuated wildly between throwing around twenties like they were pieces of pocket lint and treating quarters as if they were manhole covers. That's how you wind up on the steak or spam diet.

In the market I believe we're getting closer to the empty out phase. I can't say for certain whether the end result is steak or spam, but I can say the probabilities greatly favor the latter. Taking a trip through the technical tells I've been monitoring, here's where we are:

· Intermediate and long-term Bullish Percent indicators remain positive, but at extraordinarily high levels, while the short-term indicators have turned down. Mixed and suggesting continued consolidation, but nowhere near the "whites of their eyes" moment....yet.

· 3M (MMM: NYSE) has given a new buy signal and made a new high after an initial sell signal.

· Amazon (AMZN: NASD) has made a new high and given a new buy signal. Ebay (EBAY: NASD) has also made a new high. Yahoo! (YHOO:NASD) remains on a sell signal.

· General Electric (GE: NYSE) remains on a sell signal (half-point chart), its first since January.

· International Business Machines (IBM: NYSE) continues to act sluggish and 81 is the level to watch on the downside, an important trendline violation and new sell signal. On the upside 87 is resistance.

· Fannie Mae (FNM: NYSE) is on a sell signal with the next support at 60.

· The PHLX Housing Sector Index (HGX) remains on a sell signal and has made no real progress since topping out in June.

· The September dollar contract broke down yesterday, its first sell signal since June.

· August gold has broken through trend line resistance, as has September silver.

· As Succo and Toddo have both pointed out, the VIX has now broken a triple bottom on the point & figure chart at 20, the lowest level since March of last year. Incidentally, the last time the VIX gave a "buy" signal was in early March of this year heading into the war in Iraq.

One final observation, for what it is worth, with respect to what is shaping up with the dollar and gold; action that was considered "bullish" by many bulls back in April has now reversed, but these reversals, which would have been bearish in April, are now also considered "bullish" by bulls for different reasons. Follow that? Neither do I, so don't feel like the Lone Ranger, but that's the argument I'm hearing nonetheless.

Topping is a process, and part of that process is the final empty out phase where things look the best and the smart trade looks like the one that can't lose. Can't lose propositions make me nervous. But then, right now I'm looking at a glass half-empty.

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