Weekly Update 05-24-2010:

The S&P500 broke beneath the 200 day MA of 1102 last week which created a lot of programmed selling and put in about a 4% drop.  This firmly established April 26^th as a top in that the market has now dropped about 11.5% since then and is registering negative returns now YTD.  This certainly appears to be the beginnings of what we have been talking about for months as the market has been developing the environment for a longer term downtrend to take place.  The market has now made another “Lower Low” dropping below the May 6^th “Flash Crash” level intraday as well as making a lower close than that of May 7^th.  However, the market is short-term oversold and we will be watching now to see if we will have the opportunity to go long for the first major retracement of the initial move downward that has currently been developing.  Retracements usually will rally a half to two thirds of the initial downturn, in this case in the range of 6 to 8%.  Therefore, we are waiting to see if there has been enough “Selling Exhaustion” to signal the possibility of a rally that would be significant enough to switch to a long position for a brief period of time or not.  However, longer term we are still seeing the market making even Lower Lows than where the market is currently.  Our short position has paid off well over the last few weeks, even though we’re close to just having made only a “round trip” is still better than stopping out with a major loss to have to make up.  We are now “squared off” with the market a little better and positioned for some “profitable” moves.  We will be monitoring this situation closely and let you know when any changes need to be made.  In the meantime we will remain in our SELL position waiting for the indicators needed to go to a BUY or possibly CASH if the market appears to start consolidating into a trendless situation for a period of time.  Yours for Safe Sailing in Bull and Bear Markets.