Good Monday to you. The major indexes today appear to be picking up where they left off last week... with further weakness as I type. However, with the last two days of last week being about as ugly as ugly gets, I wouldn't be surprise if we get at least another very short-term dead cat bounce before the markets really figure out what they want to do going forward. I'll caution you not to get too excited if things improve today or tomorrow, because inevitably what happens by the end of the week is more important than anything else right now. With another week behind us, it gives us a bit of a better picture of what the weekly charts are telling us now, and unless things change dramatically, it isn't good. We'll get to the mid-term picture in a bit though. Last week's short-lived rally wasn't enough to get the short-term trend reversed as both the DOW and the S&P only established another lower short-term top than their previous two. I've included a daily chart here of the S&P 500 showing you what I'm referring to. It sure looks like a rounding pattern is developing, which would suggest the broader markets are in the early stages of a major pullback, however, we've seen this type of activity throughout the year only to be met by a sharp reversal, which was then followed by a new leg up. Is the fundamental landscape any different now though than it was then? We mentioned on Friday the S&P's top 500 stocks as a whole are 16% higher now than the same period last year, but earnings compared to the same quarter are slightly lower, with revenues only modestly higher. In short, it doesn't appears large caps are efficiently supporting their stock values at current levels, thus suggesting a sharp pullback is in order. Ever since the indexes topped out on the 21st of September, tech has led the way down, which isn't good since tech had led the way up. It's possible tech is telling us to be careful right now. I would have much rather seen tech hold up a little better in recent weeks, but that just hasn't been the case. As a matter of fact, the NASDAQ Composite closed Friday slightly below its complete 3/8 retracement level of the rally which started back in June. Usually, we see fairly significant rallies off of those major logical support levels, but that has yet to happen. Furthermore, the NDX (NASDAQ 100) completely blew through its 3/8 retracement level from the June rally and is approaching the 50% retracement level, which also doesn't bode well for the rest of the markets. Back to the mid-term outlook now. I've included a magnified weekly chart of the NDX. As you can see, last week's rally was only enough to create a slightly lower high than the previous week, then it blew off further to the downside. You've heard us mention in previous editions that when stocks are thrusting like that of the NDX ever since the beginning of June, pullbacks are usually met with strong buying within three weeks or so from breaking below their 3X3 DMA's (blue line). This week would be week three below the 3X3. If this market is going to remain just as bullish as its been ever since the beginning of the summer, this week or next at the very worst needs to see a weekly close above last week's high, which I've circled in the chart here. That's an awful lot of work to do considering how ugly last week's close was, but never say never. If you've been in the camp which hasn't been able to justify the run-up in stocks this year, then a parabolic move up the charts would just be another resilient effort from the major indexes across the board. If I had to say, I suspect we're not going to get a big enough rally this week to wipe out last week's losses. However, if we can get some of that done this week and get some nice follow through next week, maybe the indexes will have enough momentum to find new highs, but that's a lot of wishful thinking as we stare a short-term bearish market in the face and elections only a few weeks away. What is probably more interesting than anything else right now is where exactly are the indexes going to be on election day? I can assure you the next few weeks is going to tell us a lot about what this market wants to do going forward, so stick with us and we'll do our best to give you better guidance than you'll find anywhere else. Additionally, since large caps seem to be waning like no other, we've most definitely got a landscape for explosive profits in select small caps since traders everywhere will likely gravitate to those small stocks getting a lot of positive attention. Where else could they go right now?