Another volatile week in the back pocket, and no real improvement in conditions. A lot of bad days spiced by one huge reversal for half a day - but we ended up significantly lower on the week. Technically, we continue to grind at best sideways and an honest assessment would say "lower". Last week we named our range as 850 on the downside to 970s/980s on the upside on the S&P. We penetrated below that Thursday (840 was the line in the sand), set off a rash of stop orders as we quickly collapsed to S&P 820 and then a technical reversal which trading desks jumped on to make some quick short term gains ensued. But we lost much of it Friday as the lack of conviction permeates.


An optimist could say we are building a wide base here; a pessimist would say we continue to make lower highs and cannot even break through the 20 day moving average to the upside. This bear year was previously topped out by swings in which the market would make runs at its 50 day moving average (at least) and its 200 day moving average (at best) - now we are not even making serious strides at breaking through the 20 day. Right now that is S&P 930; the 50 day is 1030 and falling fast. As I said last week, any move up to those levels I only take as "white noise" and a trading environment aka the casino. We cannot build any bullish condition off that. In fact the longer we stay below support without making an a serious attempt higher, the more bearish a stance one must concede. While we broke S&P 850 on an intraday basis, we have yet to break it on a closing basis - that would be the next foreshadowing we're looking for if we are to make a new leg down. If this happens, we'll remind the next target down is S&P 770s or so, although we'd have "round number" psychological support at 800...

None of our conditions that we are looking for to to deploy capital in a meaningful way are improving - in fact it is alarming how none of them are. Some of these would include: reduction in volatility, separation of "benign" sectors from "poor" sectors, separation of "solid" companies from not so solid within a sector, the end of "student body left" (sell everything!) and "student body right" (buy everything!) trading, the ability to invest in 98% of stocks with more than a 2-48 hour time frame, the emergence of any sort of sustained leadership.