Hi Traders,

There is an ancient Chinese proverb that goes: “Stocks take the stairs up and the elevator down.”

Okay, maybe it isn’t “ancient” or even “Chinese” but it is well known and certainly holds true.

This week has caught many investors by surprise and in order to avoid losing our shirts, it is important to know what could happen from here. Those who have have read previous posts know, I have been warning of uncertain times and that my analysis as well as MarketClub’s “Trade Triangle” technology have been pointing to market neutral since January 20th. MarketClub has also been bearish on gold since the 22nd of January. So what is happening to the markets?

Where are the markets right now?

The recovery in the indexes from March of ‘09 was basically just that, a recovery. Spurred and maintained by some very powerful economic forces. Our Fibonacci retracement indicator was spot-on and points to a potentially more negative down move in the future. All of the indices managed to recover back over 50% of the gains before this recent downturn. They have entered the “thin air” levels which are very hard to break above. Although there it is likely they eventually will, they will have to climb as serious “wall of worry” before they see steady gains.

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