You know a writer is a bear when the market bounces and rallies, and he has nothing to say. Well, I have not written in two weeks, and the market has suddenly gone from bad to good and people are getting hopeful again. I am not here to burst the bubble, especially since I suspected in all my recent missives that a rally had to materialize. The rally just took a bit longer than I expected. My real excuse is that I have been too busy enjoying the action to sit still and write a little something.

I am mainly writing today to acknowledge that suddenly things have turned for the better when just a while ago all seemed lost. This is classic market chop-chop. I would emphasize that during these periods of market churn and uncertainty, you cannot let your emotions get the better of you. You have to keep an eye on the longer road ahead of you (choose "longer" to mean what you want!). More importantly, you cannot let yourself be fooled by the short-term headlines that cry out the latest excuse for the market to buy or sell. For those of you who have been watching, you probably noticed how fears of high interest rates, inflation, terrorism, chaos in Iraq, and high oil prices were supposedly weighing on the market. Yet, we had a nice snapback rally at the end of the month which saw little material change on any of these ominous news items. Certainly the Saudis seem intent on keeping their promise to the Bushies to get oil down to cheap levels by the time of the election, but oil gurus are already questioning whether the Saudis can be successful if indeed they are the only ones with capacity to increase oil production. This weekend's terrorist attacks on their oil complex will not help the market's confidence in Saudi super-powers. (Of course, we would be remiss to note how the gurus confidently proclaimed that oil was headed to the low $20s soon after the fall of Saddam! Now that they FINALLY seem to be collecting their consensus much higher in the neighborhood of $40 or so, I cannot but help to raise my skeptic's alert again.)

A few more notes… there are several market adages playing against each other now: "sell in May and go away (until the Fall)", "summer rally", "election year rally", "cyclical vs non-cyclical in a rising rate environment", etc… At this point, all these things are so much noise. The only people who will enjoy this market will be the very short-term traders. The longer road ahead looks very choppy to me with no major trend breaks or major trend confirmations in either direction. You already know that I think the market has already put in its top for this bull cycle, or at best we will put in a marginal new top sometime before the U.S. Presidential election in November. I also suspect that the market will not have any more vicious sell-offs like the ones we have seen in the past few months until the bear market is truly ready to resume its machinations (absent of course major events on the macro-scene). So, it will take a very strong optimist to want to bother hanging with this market, but any sour pessimists are bound to be disappointed for a while as well. In the middle, you will have to pick and choose your stands and be prepared to retreat and re-gather the forces at a moment's notice.

Until we get some more clear direction and resolution….be careful out there!