Market Struggling To Get Higher

The broad market attempted another rally today and for the most part delivered with the retailers and the energy stocks leading the charge. This combination of leaders has a funny feel to it, that being inflation. We are buying as fast as we can at stores (credit to buy furniture) and driving energy prices up along the way(credit to buy Hummers) .

This rally seems close to over with the way the market traded today. Our indicators show vast amounts of overbought at this time but that doesn't mean it can't go up a little more. We just don't think this is a good time to be buying any non-commodity type stocks. Speaking of commodity stocks, gold stocks managed a little volatility today by making a new high for the move but closing a little lower, basis the HUI. The BGEIX did manage a small gain on the day, however.

There is not much for a bear to talk about in this market except that it seems to be a good time to sell into strength. Bulls tend to revel in the moment even though we are struggling to get back to the highs let alone bust through them. Yes, there are certainly some stocks breaking out, but does that mean market strength?

The market is attempting to get back to the June highs and in some indexes has succeeded. Since the move has gotten the media lathered up, the sell signal is growing very close indeed. Capitulation on the part of the bears is at hand and when that happens, look out below.

I realize that my October low theory is just that, a theory, and it seems to be outlandish at the moment but please "bear" in mind that the moment selling starts this time, there will be no one to sell to and prices will drop hard.

We have said in the past year that the stock market is dependent upon the credit market for excess liquidity, meaning as long as people can go to their personal ATM (yes, their house) there will be room for the stock market to hold. Once the stock market sees less liquidity out there, it will drop long before the housing market does. It's a lot easier to dump stocks than to sell your house. October is waiting for you and it's only three months away, can you believe it?

Dow Industrials: 10,513.89 -5.83 (Isn't 10,500 getting just a little dull?)
BGEIX: 11.37 (another relative high)