The market has officially gone into oversold mode, but it would look like the correction could last a bit longer. Markets can remain overbought and oversold for long periods.

One thing is for sure. Normal market volatility has returned, and the complacency of the last eight months is gone, and we can expect more wild swings as the market continues to correct in the real estate and mortgage markets.

The original guess was a 10% correction, which was actually needed by the market in order to clear the mechanism and allow the market to move forward.

At first blush the market may well move back to 1340 on the S&P 500 to 11,510 on the Dow. Those would be normal bounce points, but this may not be a normal correction, based on the triggers. Since many assets are now re-pricing based on risk factors, we may not stop there. Those levels would be 50% retracements of the current rally.

Top 20 funds ranked by relative strength. If you were going to buy the best 20 funds this week, this is the list you would buy.

You can view the full list here.

Once again, we are at a crossroads. This time its the tug of war about whether the Fed will pause in August, with all the new evidence the economy is growing more slowly. Or whether it is continuing to grow too rapidly in light of the industrial production increase at twice the expected rates.

We did get an intraday buy signal today in the Dow Jones Industrials and S&P 500. We are still in intermediate term downtrend, but we could get a bounce based on the way the charts are being interpreted.

Wednesday's CPI report will be extremely important. The PPI report today showed the core inflation rate of manufacturers increased to a higher year over year rate than the Fed is comfortable with.

Market Close, July 13, 2006

We will make this short and sweet tonight.

We had a chance at an upside break out yesterday, which failed miserably. Now, today, we had a breakdown that took us out of any concept of rally.

The highest probability is that we will go down to Dow 10,700 area and re-test the June lows. If we cannot hold there, our thinking is that we would then be in a primary downtrend. We won't use the "B" word just yet but that's what it means.

If we are to get a tradable rally off the metal and energy stock earnings which begin next week, we have to hope for a miracle in the Mideast. The geo-political pressures on oil will keep the market depressed if there is no cease fire, or peaceful solution of that issue.

Market Close, July 11, 2006

Well, we are back to a crossroads again.

After a strong pullback from mid-May to mid-June, we started a tradable rally right after the Fed raised rates, for what we are sure was the last time.

Then, some disturbing news on hourly wage rates spooked the market along with the North Korean missle crisis caused a pull back. Then today, we opened the markets slightly higher then fall back, got news of the bombings in India and promptly tanked.

As luck would have it, though, late in the day we got the release that KLA Tencor, a company involved in chip equipment manufacturing, had beat its sales estimates. So, of course we rallied the market sharply and closed with strong finish.

Market Close, July 5, 2006

Global tensions. Better than expected factory orders, and a very upbeat projection on the Friday jobs report. The net result: markets in the tank.

Monday, we had the first signals of positive market reversal, and some indications that we could see the tradable rally we spoke of a couple of weekds ago. Our planning did not include one dictator in North Korea, and his merry band of long range rocket scientists. The current effort lasted 40 seconds and crashed into the sea. Not just any sea either. The Sea of Japan. So the Tokyo market tanked early and often, soon followed by the remainder of the Pacific Rim.

Market Close, June 28, 2006

Nothing has changed in the markets. If you look at a chart over the last two weeks, it looks like a nearly flat line. Up 50 today. Down 100 yesterday. Up. Down. Net result?

Waiting for the Fed. The sad part of that is that, a 1/4 point rate rise is a sure thing. If the language in the FOMC's release has not changed, I'm fearful that the market will take it negatively.

So tomorrow looms as a very important day, as well as Friday. Remember this quarter end, so the mutual funds will be doing their window dressing. Then, we go into a half day session Monday, and the 4th on Tuesday. Traders will want to go out for the long week-end flat, so we could see some early fireworks. Stay tuned.

Market Close, June 26, 2006

There is enough going on in the markets to entertain any observer. Some of the goings on are good, some not so much.

The market rose today, but the volume was too light to consider it a follow through day of any kind, and so we stay in the Intermediate Term downtrend. Market breadth was nearly 2 to 1 positive, but new highs trailed new lows 31 to 178. The McClellan Summation Index had is first positive reversal day in the past 15 sessions.

One of the things keeping the markets supported are the mega mergers, which appear to be in a race like can you top this. Friday, Anadarko Petroleum stepped up with the purchase of two rivals, Western Gas and Kerr-Mcgee for $21 billion.