At this juncture the consensus seems to be that the markets are doomed to a
decline to 6000-6500 on the DOW industrials and investors and traders stand
froze with a lack of confidence on the Governments ability to stem the bleeding
in the banking industry especially in the wake of GrandStanders like Alan
Greenspan and Senator Dodd who just love getting their names attached to
soundbites tailored to be repeated ad-nauseam by the media and YouTube replays.

The latest tailspin was exacerbated by his inference that major banks would
be nationalized ...a prospect rejected by the administration, but enough of a
hot button to set off a major selling wave.

While the markets wait for someone from the administration to detail the
'True" plan for financial institutions, rumor and innuendo run rampant. The
financial markets are core to recovery and traders and plumbers alike want to
know when they can expect some of these stimulus juggernauts to impact them in 
personal way. Until we have some catalyst within the financials there is NO
chance of a psychological shift in confidence.

As we look at the falling averages it seems that there is no safe haven sans
Gold which of course has seen unrelenting buying pressure, especially for the
hard asset.

Remember, though, just as a rising tide lifts all boats ( the old adage as
related to stock market prices), a receding tide also sinks all boats, although
not equally.

In "Normal" times we have seen substantial rotations throughout then market
sectors which has always allowed for profits to be made under all market
conditions. For the last year there have been NO safe havens, primarily due to
the inordinate redemptions of Mutual Funds and especially the Hedge Funds. As
the redemptions have come in there was no opportunity to put existing or new
money to work in favorable rotating sectors. Instead the supply of ALL stocks
was magnified and as we learned in High School, in between spit-wad wars and
snoozing in the back of the class, when there is more supply than demand PRICES
DECLINE.

One of the interesting things that is happening right now is that we ARE
beginning to see the fuel which will drive future rotations even as prices
seemingly continue to drop without respite.

As an example, here is a chart that compares the action of the DOW stocks
plotted against the $NDX tech index (traded with the QQQQ.

Now, if all stocks were rising or falling equally within the two groups of
stocks you would expect to see a flat line at "zero" represented on the chart by
a straight line.. Notice however that we have had a rising line since the first
of January which indicates that the NDX (or QQQQ) has been outperforming by 158%
the more traditional DOW index. Now does that mean that the NDX has been
rising?...No. what it means is that it HASN'T BEEN DROPPING AS FAST as the DOW.
As a matter of fact, the DOW has been dropping faster than any other index we
watch, including the NYA, the SP500 or even the Wilshire 5000. The DOW is down
23% since early January, whereas the QQQQ is only down 9.5%.

The significance is that WHEN we have a market turn, even if it is only an
oversold bounce (and we are very oversold), the NASDAQ should see greater gains
that all of the other broad sectors.

FINALLY however we also see some beginnings of sector rotations even though
markets are declining.

Just look at the BBH (Biotech Index) over the last few months in the face of
broad market selloffs.

We have a very nicely formed cup and handle which projects a near term target
of $198.64 from the current level. Obviously the index has NOT been caught up in
the panic of the last couple of weeks.

What I teach in my mentoring is that when we see a sector opportunity, we are
ALWAYS better off finding the "best of breed" stocks within the ETF because they
are the ones which are driving the performance and there are always bottom
dwellers and mediocre stocks which keep overall profits down.

Here is a perf chart that shows where the real power is in this index.

If you just stuck to the ETF, you can see that profits since November have
hovered around 8%, but if you look at the two pack leaders ENZN and ALKS you can
see that they are up 100% and 50% respectively. By buying the top 3 we have the
diversity offered by the ETF without accepting subpar performance.

NOW...do we want to jump in and by Biotechs tomorrow? An emphatic NO. We are
in a period where the tide is going out and while these stocks are holding up
better than the rest of the market we don't want to see the drawdown that might
accompany a further drop in the DOW to 6500 or so if that is in the cards.
Rather we want to see the major indices begin to lift the tide again...even if
it is just a temporary bounce so we have a better chance of increasing the odds
of a successful trade right off the bat.

When will that happen? I don't know, and obviously nobody else does either
because it is such a hot button driven by market psychology. MAYBE it will
accompany a sensible plan put forward to support the financial markets, but we
can wait for it and when the time is right place our bets when we have that
support behind us.

We also identified the Tech Index (QQQQ or NDX) as being more stable than the
DOW and broad markets right now.  That is where the strength will come from
when we are ready to rebound and it will be from the likes of RIMM and AAPL and
AMZN who have little debt and continue to perform even though their stock has
been cut in half. These are great value stocks that do not depend upon financing
for inventory and have the best prospects for continued growth.

That is the primary reason the NDX has held up so well. Even though you have
many tech stocks that are in the doldrums, the index does not contain bank
stocks or brokerages that draw down the performance.

These times feel scary, but believe me, it felt just as bad and hopeless in
1974, and in 1987 and 1991 and 1998 and 2000 and these quickly turned into the
best buying opportunities of their times. Despite what the doom and gloomers
say, this market will not go to zero and you will have the opportunity to not
only recoup but capitalize on events.

Even the real estate market will recover. You may be looking at a house that
has now lost 30% of its value, but if you are in a position where you do not
HAVE to sell, ultimately value will return quickly when hyperinflation sets in a
year or two down the road. Indeed your spending dollar will buy you less, but
those interest rates will make your current mortgage look like peanuts and your
house value in keeping up with inflation will provide a good return on your
investment...faster that most people would believe.

Enough philosophy for tonight...keep an eye on support levels and watch for
the catalyst that can provide a buying opportunity...not for the long term, but
for quick and substantial profits on the bounce. Long term we have a lot of
problems to work our way through over the coming months, but it doesn't mean we
can't pocket some profits along the way.