8 things that are worrying me about the market

Let's see...Paramount tells Tom Cruise to take a fly. They say that his recent conduct was unacceptable. Hmmm! He went on TV...jumped on a couch to profess his love and he argued that kids were becoming overly medicated to depression pills. Yes...terrible conduct. Last I looked he did not say that Jews caused all wars...he was not arrested for doing drugs or DUI...he does not produce videos that portray women as...well, you get the hint. All Mr. Cruise did was bring in revenues of $2.5 billion for Paramount...yes...$2.5 billion. What terrible conduct!

Tuesday 12:40 pm: Fedhead Guynn says inflation is under control.

Tuesday 1:00 pm.: Fedhead Moskow says inflation is worrisome.

Hey...way to send a consistent message to the markets.

Dick Grasso says he has done no wrong. Just because you put all your budsters on the compensation committee who then hand you over $196 million...nah...you good!

Ex-ceo of Fannie Mae... Franklin Raines says he did not act improperly even though a $10.8 billion accounting fraud was uncovered while he was running the show. I will leave the rest of this one for the Comedy Channel.

Repeat after me...HOUSING will be fine. HOUSING will be fine. Do not worry about the following charts. They are a figment of your imagination.



I want to repeat two paragraphs from my last report.

"I urge you to keep your feet on the ground and look at the charts of the NASDAQ,NDX, SMALL-CAP 600,MID-CAP 400, SOX, TRANSPORTS, RETAIL and HOUSING. Let me be clear about something. These are NOT BULL MARKET charts...and they continue to lag badly. I am saying this knowing about last week's action. I know the DOW and S&P are back within a smidge of their highs but we told you from day 1 of the top that they would outperform at this time.

If leadership shows up...if volume patterns turn better...if stocks break out...I will be all for it. I have no bias to the market. If the Dow wants to go to 40,000 in 3 years like Harry Dent says it will...I am all for it. I am just very suspect of what I have seen so far...and are still not thrilled that so many areas are still showing bear market charts."

One week off of a follow through day that is supposed to change a trend, I am worried that:

Small and mid-cap indices could not break through resistance and now "feel" like they are rolling over. These are the areas that led the market down.

The TRANSPORTS continue to act horribly.

Many other countries are now starting to roll over again.

Lowes, Home Depot, Dress Barn, Costco, Best Buy, Dollar General, Wal Mart, Payless Shoes and many other RETAILERS are heading south faster than the Boston Red Sox.

Many tops in OILS...In fact, the OIH looks like a big giant top. A break below $134 would be negative. A break below $130...and stick the fork in. OIL PRICES do look like they have also topped.

Lenders continue to be blasted. Names like COF, CFC, LEND, ACF have been obliterated. Anything MORTGAGE-RELATED is breaking down.

HOUSING stocks look ready to break into new lows...AGAIN!

COMMODITY stocks look like they are just about to roll over from their recent consolidations.

All this with the Dow and S&P just a smidge off their highs. Once again, please recall that I have told you on several occasions that the Dow and S&P would hold up better during this time. When the market gets defensive, the market buys defensive MEGA-CAP companies that have a great influence on the major indices...thus the outperformance by the Dow and S&P.

I do not like what I am seeing. It is this underneath the surface action that had me call the top on May 11. The underneath the surface action is now very worrisome again...and do not think the market will hold up if this continues. I have given the market the chance to prove itself off of the recent follow-through day...but now think it is starting to fail. I suspect things are going to slow up into Labor Day weekend and do expect we could get some upward bias action into month-end...but after Labor Day...let's just say...things had better shape up.