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Troubling Action in Many Market Sectors


Looking at the action in semis, financials, foreign markets, and more, it's clear that this is a worrisome market environment.

Greetings from Venice, Italy. Quite the amazing place. In the past 2 weeks, my family and I have traveled to Barcelona, Naples, Rome, Florence, and the Amalfi Coast. You must... must... must visit these great cities. I'm finishing the trip off in London before heading home.

There's a lot going on since I left. This just continues to be the mother of all news-driven markets. Taxes, debt, Italy, Greece, and so on. It never stops. One would think the Dow would be at 7,000 by now with all the "bad news" out there. The fact that the major averages were just near recent highs amazes me.

We head into a big earnings season next week so pay attention. Before I left, my outlook was becoming more positive. This was based on long-term moving averages and support holding. On top of this, I liked that many growth leaders were turning up. So while long-term support held, the top of the range is acting as a strong ceiling. The main reason major averages can't break out is that there remains too many areas in poor shape. If those are not resolved to the better, they should come back to haunt the market.

I am worried about the semis. They are imploding again as the SOX could only rally back up into the 50 day moving average. They were smoked in past days on worsening outlooks. I always put a major emphasis on this group.

I also continue to be worried about the financials. To repeat, they continue to act like it's '07 all over again. In fact, many important big names are near or at recent lows... some near yearly lows. This is very important and bears watching. Just take a gander at Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC), Bank of New York Mellon (BK), Wells Fargo (WFC), JPMorgan (JPM), and many others.

Moving along, I'm worried about many countries around the world not only lagging but breaking down. Take a look at the charts of ETFs like iShares FTSE China 25 Index Fund (FXI), iShares MSCI Brazil Index (EWZ), iShares MSCI Germany Index (EWG), and iShares MSCI Hong Kong Index (EWH). Many others look the same.

I do not like that, in recent days, I have seen many failed breakouts.

I'm not thrilled that the S&P is back below the 50 day. I'm not thrilled that we are already seeing higher volume selling in the market.

To recap, long term support held, but a move back into recent highs was smacked down. There remains very worrisome underneath-the-surface action while all this is going on. This remains the toughest of all markets. It's a market that gaps up one day and gaps down the next day. It's a market that is still in a trading range that goes back 6-7 months. It's a market that simply drives many up a wall. This should be quite an interesting earnings season.

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No positions in stocks mentioned.
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