Looking out over the horizon last Wednesday, it would have been impossible to see the cliff right in front of you. That’s because the sun was a shinin’ right in your eyes. It all looked rosy just days ago as ingredients for a nice little rally were thrown into the pot. But the recipe was ruined with the addition of earnings warnings, a surprisingly lackluster jobs report, terror warnings and the addition of corporate killer John Edwards to the Kerry ticket.

Nothing is ever certain in the market. Technical analysis using price and volume data of the major indices provides clues and a general probability as to future direction, but it is never absolute. Generally speaking, breaking through resistance and finding support are bullish signals. On the opposite side, retreating from resistance and plummeting below support are bearish signals. More often than not these signals work. When they don’t it’s critical that in order to protect your capital you act quickly and decisively.

Looking at the current state of the market, the Nasdaq is in trouble and will most likely test previous lows (setting the stage for the rare triple bottom?). Yesterday marked the 3rd day of distribution in just a weeks time. That is enough to derail any rally. The DOW and S&P still have the support of their 200 day moving averages, which is critical for the market. I’ll be watching these levels closely. CANSLIM leading stocks are not sustaining breakouts and in many cases completely breaking down (See ESCA, FILE, SNIC, BRCM, HIBB, HLEX.. and on and on). In fact leading stocks have lagged the general market for five days in a row. OUCH!!

Amidst all the doom and gloom, there are bright spots in the market. Opportunities can be found in Oil/Gas & the metal markets (Gold, Silver & Copper). However, you may want to be careful by purchasing half positions and setting tighter stops. Good luck.. it’s a jungle out there!