So the Dow seems to be holding up fairly well, yet cannot seem to reclaim lost territory. Are we bottoming or basing temporarily for more downside movement? My analysis would suggest the later. Let me tell you why.

In most charts we see a pattern indicative of sideways movement. Behavior that would put the common trader to sleep. This idleness is a momentum builder for a large move to come. Near its peak of 12,800, the Dow Jones Industrial Average plummeted over 500 points and is currently flirting with the possibility of dropping below 12,000 since October of last year.

In the chart below I have drawn a channel in which the Dow is currently trading. This brief basing period typically signifies that the trend is likely to continue in the direction prior to the consolidation. It is very much the case that we could see another drop of 500 points or so in the near future. This could be next week or in the weeks ahead. At any rate, the move is coming and it is coming soon. The very fact that my screen is failing to provide investment opportunities is a sign that the momentum has been literally sucked out of the market. Approximately 75% of my portfolio is in cash and you should decide whether or not you can stomach another jab from the market.

Now take a look at the MACD and DMI indicators. They are both telling you to sell and there is no reason to believe that a positive divergence is coming anytime soon. I will let you know when a bottom is near. Be patient and wait for your opportunity to strike. Chances are you will be getting in at the best possible price. So, if you were ever thinking of getting away from the markets and taking that vacation, now may be the best time!

Good Investing…