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Hyyyyyyy Yaaaaaa. Let me take you back to the days of old. You know the ones where you walked two miles to school - uphill both ways. Well during the good old days, there was a cartoon called Hong Kong Fooey. This cartoon featured a bumbling canine karate expert who stopped the bad guys. Hong Kong Fooey had a huge windup into what looked like was going to be a powerful and painful karate chop, only to either miss his target or generate a minimal amount of pain. As he was winding up, you thought for sure this time "it was really gonna hurt - but it never did." He always stopped the bad guy, but only through a lot of luck and the help of his patient and tolerant partner.

The same could be true when looking at today's market environment (and my associate Mike). There are many reasons when focusing on the day-to-day action to become increasingly negative and expect a nasty fall, but when stepping back a bit, a different outcome looks a bit more possible. Here are some near-term issues and an alternative view:

• The S&P 500 (SPX) broke the lower end of the two month range (Exhibit 1). While this is true and may cause some very near-term downside follow through, intermediate-term support is not that far away (Exhibit 2). In addition, the drop couldn't be viewed as overly dramatic because volume was below even the range bound daily average volume readings.

• Long-term bond yields have spiked (Exhibit 3) and dramatic rise could choke any emerging economic acceleration. Again, it is true that yields have moved dramatically higher, but taking in context with where they were a year or more ago, rates continue to be historically low (Exhibit 4). In addition, periods of high volatility are normally followed by some level of stability - even if brief in nature.

• The internals of the market look pretty negative. It is true that net new highs vs. new lows on the NYSE is negative for the first time since the end of March and the market has lost some momentum. These are valid points, but it seems to us that just a few short weeks ago, the argument was the level of momentum was too high and needed to "relax" a bit. Now that the market has corrected the internal excesses of a few weeks ago, should it be viewed as negative or positive? Funny how psychology changes.

Who knows, the equity market may be headed back into the range it just recently broke above, but if you wanted to be invested as it was gaining momentum, and now the excesses of the market are being worked off, the economy is showing signs of real vitality, and prices are back to where you wish you were invested originally, have you changed your opinion now that the market progresses in working off the intermediate-term overbought condition (Exhibit 5) and approaches support. We are still chuckling over the "Hong Kong Fooey" analogy, but it seems to make sense.

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