Weekly Update 1-04-2010:

Happy New Year!  I hope you all had a very good holiday time with family and friends.  In the last two reports of last year we talked about “Range Bound” and the “Santa Clause Rally”.  The “Range Bound” report talked about how the market had been stuck in a back and forth range of about 1080’sh and 1115’sh in the S&P500 for a couple of months.  Normally after ranging in these channels for some time the market will make a break either up or down and then continue a trend in the direction of the break, UNLESS, that break proves to be a “False Breakout” where the breakout  ends up being a “head fake” and the market falls back into the channel.  In those cases, it often results in momentum picking up towards a break in the opposite direction, in this case, DOWN.  Well last week we talked about the “Santa Clause Rally” that was possibly taking place and following that report, it did.  This rally took the SS&P500 to new highs for the year and broke the market out of this range to an intraday high of 1130.  However, the week following Christmas showed that the rally continued up for a couple of days, only to peak and turn down to close the year on the upper boundary of the range at 1115.  So at this point it’s still not determined if the “break out” that was generated by the “Santa Clause Rally” on EXTREMELY light volume is going to hold and serve as a starting point for a continued sustainable rally making even more new highs, or if the “Santa Clause Rally” highs will be it for some time to come.  The test can often come as the market attempts to “retest” this previous high to see if it will serve as resistance and fail to continue higher, sending the market back down or if it is able to establish a new series of “higher highs” followed by “higher lows” therefore establishing a continued upward trend.  So we are going to continue to monitor this situation to see which scenario proves to be valid and then make our move accordingly.  Even though the technical picture continues to become increasingly clearer that we are nearing a major down trend, it seems at times that the market is taking forever to make this development.  Be patient, we are getting increasingly closer to that point.  In the meantime, we will wait it out in CASH.  Yours for Safe Sailing in Bull and Bear Markets.