Downtrend Getting Underway

Top Line: The stock market had a difficult week last week. Normally, the trading days before a long holiday weekend brings some buying. With any rally at all as we go into month end, we think these will be excellent times to sell and we probably will.

This market showed a strong down move last week and the upcoming week is the last week of the month, a typically bullish period. We like to think the jobs' report is the "first of the month" which is normally the first Friday of the month. This report sort of marks the area where the turns occur. This day is a ways off but we mention it because we think the next two weeks hold the potential for not being typically bullish.

There is a chance for a very short lived rally that takes shape over the next few days just because the selloff last week brought some sellers out. This usually means that the buyers think that all the sellers are gone. We do not think that is true but these things tend to generate rallies. As we go further down from here, these rallies will become fewer and fewer until they cease. This will bring us a Real selling climax--which we will probably want to buy. But, that's a ways off for now.

We want to bring up the oil complex for just a minute. With XOM (Exxon Mobil) dropping from its 96 high on Wednesday to its closing price under 91 on Friday, we think the possibility of the oil having peaked is becoming more a reality. Like we said last week, though, calling the high for a commodity that has been hitting all time new price highs is a low probability event. Our "tell" seems to be XOM and that 96 high from last week. That barrier should hold firm and if it doesn't, our call for a top in oil will be challenged. Until then, we will consider the entire commodity sector in failure mode with prices dropping for a while. Gold broke down before oil and now the two of them should get in sync on the downside.

The previous paragraph goes hand in hand with the value of the dollar. We seem to think that everyone in the world "knows" the dollar is going to go down. This seems like an easy time for the "contrarian" to say that the dollar should now be headed up. The dollar going in the opposite direction of oil, and gold, would fit with the setup from the last paragraph...the dollar should now go up against most foreign currencies.

We'll see how the trading day goes on Tuesday and report in again tomorrow. We hope you had a safe and happy holiday weekend. Nice to have you back...

FSI: 90.87 (not much change here indicates complacency and speculation at the same time)