Message of the Markets

One of the old rules of investing is to not fight the tape, and obviously, the uptrend from the March bottom has been broken. It can argued that on May 19, the indices put in a double top, which is a very bearish signal. In reviewing the NASDAQ chart below, we can see the piercing of the 200 day moving average, again very bearish.

Is there another shoe to drop in the financials, perhaps rumored Lehman Brothers (LEH:NYSE)? I think another Bear Stearns is unlikely but some are in real trouble. The noise being thrown out by folks, including rhetoric by many company executives who are somehow not being prosecuted, gives us nothing to work from. I would not commit any funds to the financials for the near future.

Protecting capital is paramount, but I do have a sense that the market may snap back here and you may not want to be on the sideline. Oil catapolts up seemingly daily, commodities continue to move higher, the Iranian issues are escalating, flooding in the midwest likely will move food prices higher than they are already going and we seem ready to elect a neophyte Marxist President. All this adds up to a geopolitical disaster to dance with the economic fallout from subprime. Ouch!

It can't be that bad. This is the United States of America!! The dollar looks primed to move higher while gold seems toppy. Oil reminds me of folks chasing money similar to the dot.com days and the 2005 housing market.

At any rate, this is defensive time but out of these times comes innovation and opportunity.

The time is now to be ready to make your next moves.