The dollar made a huge leap on Friday and is poking just above its sharply declining 50-day price moving average. This recent burst in the dollar could explain a lot of the weakness in commodity-related plays. Remarkably, this apparent resurgence in the dollar, perhaps the strongest in a very long time, coincides with some choppy and grinding action in the markets. The technology sector has been the worst performer of late, and it is the closet to making the dreaded year-to-date roundtrip (I came up with this phrase as I watched numerous speculative stocks in recent weeks plummet. These drops were made all the more remarkable as prices skated right past points from which these same stocks took huge leaps on positive earnings guidance and other related news. The YTD roundtrip occurs when a stock comes back down to where it stood at the beginning of the year. Anyone holding onto such a stock during such a trip must feel very frustrated!)

Anyway, this past week was options expiration week, and it featured some of the most dramatic action we have seen during such a week in a long time. The technology sector has been the location for a lot of this crazy action. It all came to a head Friday when a small amount of positive action quickly turned ugly. The selling also had the strongest smell of panic I have seen in a while. And just as suddenly, the buyers finally stepped up and almost took the market back to even. Did we just dodge a bullet? The NASDAQ looks the most precarious of all - clinging again to the 50-day price moving average but ALSO clinging to the uptrend line that has marked the rally all the way from March, 2003. Note that the NASDAQ has never come this close to breaking this uptrend line! If the NASDAQ makes a break of this double support, look out below…we will not only return to YTD prices, but perhaps usher in the first real correction of this rally. This is a correction that bears AND bulls alike have long been waiting for. Given that almost everyone is looking for a big correction, I would first be on the look-out for another strong selling day that shakes out the weak hands and quickly reverses. It may have already happened on Friday. Regardless, these next two weeks leading into the next employment report should provide some pretty dramatic trading days.

And don't forget the importance of these employment reports at this stage in the cycle. Bushie has practically staked his re-election bid on job-creation, so weak reports will further erode the nation's confidence in him and further threaten his bid to keep his own job. Increased political uncertainty will NOT be good for the market (could be good AFTER a president has been elected…or selected as the case may be). Ironically enough, a strong report will re-stoke inflation fears in the market - again, not good. See where I'm going? There is not much good that can come from these employment reports at this stage in the rally. It is best you do not make your investment or trading bets around these reports.

I see a lot of technical indicators that I watch pointing to a market that should keep going lower. Moreover, all this steady grind, punctuated with strong mini-rallies that get quickly sold off and even down, gives one the sense that this market is extremely tired. You only need to review stocks like AMAT and OVTI to see how quickly rallies generated from good earnings news have been killed. These fades give the sense that the new bias in the market is turning downward. The Nazz is about as low as it can get without setting off some alarm bells. Individual stocks have long since set off alarm bells…it is only a matter of time before we find out whether these poor boys and girls are precursors to something bigger. In the meantime, the best we may be able to hope for is to keep dodging bullets!