Market Comment: A month to forget: The month of August was one of the most volatile months in stock market history starting off with a breathtaking collapse followed by a sharp reversal after taking out the low end of our recent trading range. Shortly after the S&P 500 broke the intermediate term support at the 1200 level, it fell very quickly to the 1100 area where it reversed abruptly and rallied sharply. Recently the market closed above the 1200 resistance on three occasions turning the trend from negative to neutral. Unfortunately the damage done to the majority of chart patterns suggests that while the low for the move has likely been seen, we will need a considerable length of time to rebuild individual chart patterns. On the bright side, both the NASDAQ Composite and Russell 2000 Growth indexes registered a “W” bottom which is very encouraging. Another indicator which suggests to me that an important low is in was the amazing amount of fear that individual investors were suffering during the vicious selloff; the likes of which I have rarely experienced in my 30 years of investing. Most indexes and individual charts are now bumping into overhead resistance which was previously supported at the upper end of the recent trading range. At this point avoid the urge to chase the market and wait for a better opportunity in the near future. Good support can be found at the 1180-1200 area on the S&P for the short term.

Sector Comment: Most sectors of the market are now neutral and will likely trade in a range over the near term. The precious metals, energy, and other commodity related sectors are extremely overextended and appear to be early in the topping process. Avoid these for now. The financials also remain in a down-trend. The medical device, products and service sectors continue to outperform on a relative basis and appear to be the closest to resuming their up-trends.

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