Stock Market -- Time To Get Back To Work

I have been cautious on the stock market all this year
and have stayed away fully. As such, I have missed the
good, the bad and the ugly. But, with a full cash position
plus a good T-bond trade, I am decently ahead on the year.

the market is down very close to 10% from the recent all time
high. By my analysis, that more than discounts the direct
fall out from the subprime business. The decline has proceeded
to the point where one must ask whether the economy is headed
for broader fundamental trouble. The leading indicators I
track do not point that way yet, and my longer term indicators
are starting to tick up ( A weighted combo of the Fed Funds rate
Fed credit, real M-1, the real oil price, real wages + job growth
and capacity utilization%). I have some concerns about whether
inflation will re-accelerate as the economy expands, but the
sizable price correction in stocks to date provides some cover.

I now think we are much closer to a price level zone in the
stock market where we could have a decent tradable rally. I
am no timer, so I will be looking for signs of a positive trend
reversal before jumping in. It does not matter much that the
market is oversold, because a market in a downtrend can get
even more oversold. Nope, now we look for strong suggestions
of a reversal.

Could it go lower? Sure it can. Folks are now running scared
after we broke support this week. It is getting emotional out
there again, and not everyone so inclined may have thrown in
the towel. But it is getting interesting, too.

Will the Fed be stampeded into cutting rates? I hope not as a
rate cut and an uptick in the economy could send commodities
prices higher and the dollar lower and push down market p/e.

If there is a good rally in the next week or two, I am back
to work. I am also thinking that if I get lucky on the long
side, I'll sequester some dough to buy puts, something I do
rarely. However, we are in a global economic expansion that
is now more mature and which will sprout more excesses and
deficiencies as we go along.

I have included a link to the weekly SP500. Note the very low
14 week stochastic (usually suggests a rally at these low
levels) and also that the MACD has finally come down from
the moon to more respectable levels. Click.