All Your Base Are Belong To Us

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I guess I was a little surprised to read our friends in Gainesville declare that the selling was over and that the market was going to make a big push higher before rolling over again. But, hey, if they can be wrong for months on end during 2010, I guess there's nothing to stop them from the same ailment in the other direction. (Of course, if the market falls, one can always……….relabel the waves. Right?)

Allow me to acquaint the uninitiated with what a real base looks like. Here's the Broker/Dealer index from back in 2002, which preceded a sustained, meaningful bull market:


Below, as a counter-example, is the same index this year. Do you perhaps notice a difference? Yes?


There is approximately nothing holding it up. It's not a base. It simply isn't.

To continue to beat this horse, here's the Major Market Index. Broken trendline? Yes. Failed support? Yes. Robust base from which to launch a rally? Nowhere in sight.


You can even strip away the price data and look at some simple moving averages. Take note of the areas proximal to the pink rectangles. The one on the left is from the summer of 2008. The one on the right is the present market.


I feel like the last bear standing, but I haven't witnessed the denouement of this tumble. Yes, there are instances in which the market will shoot higher for two or even three days in a row, such as this week, but two days does not a bull market make, in spite of capricious Slopers folding like so much origami paper and deciding it was time to go "all in" and gobble up equities. I think it is within the realm of possibility that the Dow gets down to about 9,600 before a fat rally starts.


Friday morning's falsified government propaganda strong jobs report assured the bulls of another "trend day" with – who knows – 300 or more points tacked on to the Dow. Meh, not so much. The spinning top on the NQ below suggests uncertainty.


I remain prudently positioned with carefully-selected shorts but still and am mostly in cash. And, with that, I bid you adieu.