I was fortunate enough to spend the last half of last week working with Rick in his summer home in Seattle and then spent the weekend there with Brandi.  It was like old times for Rick and I, working side by side at his home like we used to when I started with him 13 years ago. 

It was great to be able to be at a place where you can actually go outside in September without breaking a sweat, where the AC doesn't run 24/7 for 6 months of the year, where the vegetation is green, where you can be outside in the rain without fear of being struck by lightning or swept away in a flash flood, where you don't even have to use lotion on your skin, and where you can get around without a car.  Thanks to some great friends we also didn't have to feed, preside over arguments, clean-up after, or play taxi driver for 6 other children.  Yesterday we had to get back to the real world when we arrived back in Tucson.

Unfortunately for the stock market it too is getting back to the real world this morning after being able to get away from reality for most of last week.

For those of you that followed along last week, we pointed out that the news last week really didn't matter in the big picture.  We tried to help you see the "forest through the trees" and identified 4 market rallies this year and the catalyst behind them.  The common theme behind each rally was investors believed that the worst was over in Europe.  The common theme for the subsequent sell-offs was that the short-term solutions that were being offered were not enough to solve the long-term problems. 

While many had hoped that the weekend meetings in Europe would be to finalize the next bailout package for Greece and hopefully a framework for dealing with the other troubled countries, the meetings broke up without any real solutions.  About the only solid consensus out of the meeting was that Treasury Secretary Tim Geithner should stick to worrying about his own spending problems rather than telling Europe how to solve theirs and that Greece should make more cuts.  I'm sure the sentiment towards Secretary Geithner will change when Europe runs out of other people's money and needs a loan.  I'm also sure that Greece will not be able to cut enough spending to EVER be able to pay back their loans. 

The market was able to make some positive technical progress last week (at least in terms of price).  It broke through the downtrend line and resistance at 1204.  That point should become a point of support where buyers could step in and will be key to the mood of the market participants this week.  If it is able to hold 1204 it could possibly make another attempt to break through 1220, which is the closing high during this late summer attempt at finding a "bottom".

As for our systems, we actually got a SELL signal on Friday as the market rallied near the previous highs, but the volume behind the rally was so lackluster that this served as a WARNING that the rally would not have the strength to break through that resistance.  That leaves both of our Enhanced Programs (EPA & EGA) with zero equity exposure.  Absolute Return (ARA) actually went net short late last week, so it too was predicting some weakness this morning.

We'll have to watch closely as the day develops.  Professional buyers have been accumulating stocks throughout this uptrend.  If they can start participating with a little more volume, the market could be able to make a run back to 1250.  For now, as our systems are designed to do, it is best to err on the side of caution and sit it out while this is resolved.

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