Crossroads

I went down to the crossroads, fell down on my knees
- Robert Johnson/Eric Clapton

Time once again to disect this market and see what our risk/reward ratio is like. As you know we have been at some mind bending levels since last winter but each time we seem to hit these levels the mindset quickly turns bearish only to be made to look stupid as it roars higher.

This time may be different as we have several factors at hand. One is the usual time of the year warnings but the biggest in my mind is that it is time for the stimulus money to show its hand in spades. Existing home sales were down,the Cash for Clunkers program helped somewhat but durable goods orders were down as well so how much is all this cash helping ? We can't forget about RIM and the BlackBerry as earnings disapointed huge and the share price was crushed on Friday.

We have had four straight down days on the DOW and the TA charts have relieved a lot of pressure without tanking the market and that is positive. We also have some serious terrorist threats popping up and the Swine Flu about to hit in a big way which will really test our health systems. If the hype lives up to the expectation this will in turn effect the bottom line in all of the economy.

Gold has had it's ass handed to it once again but I won't rule out a one day large move back up here but it has to happen soon as the US dollar seems to be showing some life and you know what happens to gold when that happens.

Oil also got whacked on supply levels and an economy peaking out on the stimulus.

So what do I think ? I say the DOW blows off another hundred points or two then settles down going into October. With this threat of Iran's nuke plant surprise, oil and gold will still be in play and as long as oil stays over $60 then stocks will be fine. If it dips below that level then we could get a 10% correction very easily.

Ultimately I ask myself, would you buy Apple at $180 ? Not. So stay diversified and be defensive but use your stock picking abilities based on underfollowed companies with new developments that will attract the risk money out there... sleeping dogs coming awake is the place to be.