What a week, huh? We were in the hole by more than 2.0% at one point, but then Thursday's huge bounce closed most of that gap, and restored a little optimism in the process. Then this morning we wake up to see the bears back at it - we're in the red again.  While the day is far from over yet, I think the most realistic expectation from here is for us to end things roughly where we are right now..... down about half of a percent for the week. It's sure better than the prior week's 2.1% drubbing, but far from progress.  Of course, the $64,000 question is not about where we've been, but where we're going.  I'll flesh out the details of my answer below, but the gist is simple.... we're still on a course to tumble much farther than some people expect, but much less than others expect. And no, that's not a joke. Such a move would inflict the 'max pain' on investors, proving the majority of them wrong and eating into the most unrealized profits for one reason or another.  After that, and as always, we'll hit the highlights from our community contributors just like you.    'Max Pain' Is On The Way I'd estimate that 95% of the time in this newsletter I discuss specific technical and fundamental factors as part of my guidance, viewing it in a scientific light rather than in a touchy-feely way. Today's going to be one of those "other 5%" days, as I preach a little perspective.  As investors, we're spoiled. And, we have become even more so in the last year and a half. Sorry, but it's the truth.  After an admittedly-unfair pounding we took in late 2008, we felt more than entitled to the 38% rebound we enjoyed between March and June of 2009. The 59% rally from March of 2009 to January of this year was fun too. And of course, the 16% advance we enjoyed between February and April of this year and then the 17% jump we've experienced since late August were pretty sweet as well. Yet when we slide just a mere 4% as we have over the last couple of weeks, the hysterics set in; it's all relative. Getting used to big rallies in itself wouldn't be a big deal, except it can - and does - cause us to make bad decisions when stocks stop going up and start falling back. These stalls literally split the market into two bitterly-divided camps, neither of which is doing themselves any favors by taking on extremist views.  The first camp is largely made up of myopic bulls, and is admittedly the smaller group (though still a sizeable one). This group actually views the 4% dip as a 'buying opportunity', and sincerely feels the 17% runup since August will continue to unfold at that same pace.  The second group is largely made up of perma-bears, conspiracy theorists, and average investors who have just been burned too many times; it's the larger group of the two. These are the folks who every time the market turns south to the slightest degree, they point a finger at the chart and say "See, I told you so .... and this pullback is just the beginning."  Here's the thing - both groups have been wrong several times since early 2009. In fact, both groups have yet to be 'right' in a meaningful way since early 2009.  That's no joke. With the exception of the initial wave of bullishness that broke the bear market in March of 2009 (which isn't apples to apples anyway), we've not seen ANY uninterrupted move of more than 25% during this entire bull market. And, all but one of those have carried the market no more than 20% higher.  That's right, since early 2009, the market's average 'upswing' before seeing a correction has been a mere 19.2%, and that average is skewed by the March/June of 2009 rebound of 38%. Take that big one out of the equation, and the average size of any major rally since the bull market began is actually only 15.4%.  Point being, for the folks who are still bullish right now and don't expect to see any more selloff, just know that the peak-to-trough move of 17.1% since August is already beyond the norm.  As for the bears who explicitly assume it's only a matter of time before we enter an 'inevitable' bear market again, your assumptions have been wrong five straight times since early 2009 as well. The AVERAGE major corrective move from the market since then has been 9.8%, the biggest of which was only 14.6%. ('Only' is admittedly a relative term.) The smallest dip, however, was 7.0%.... which we've yet to rival with the current correction. Here's a full screen shot of all that information, for perspective.  Said another way, if you think the dip is over and you can wade back into the water now, just know you're betting on something happening that we've not happen seen in years. So what's the 'max pain' theory I was talking about, and how does it apply here? It's used a lot in the options-trading world, but has implications for all stock traders for the same underlying reason option players worry about it. The max pain theory is just an idea that the market has a way of inflicting misery on the highest number of people it can at any given time.  Don't laugh - the idea actually has a lot of merit.  The maximum amount of pain that could be inflicted right now is a correction that (1) is bigger than the myopic bulls expect, and (2) is smaller than the perma-bears expect. And interestingly, that's pretty much what's been been dished out since March of 2009.... rallies that stop just when the masses think it's going to last forever, and corrections that stop just when the masses think a complete meltdown is a foregone conclusion. [And as it just so happens, the December SPX options open interest tables suggest the S&P 500 will be priced around 1160 by the time we reach December's expiration day..... about 3% below where we are now.]  The truth is, the market rarely moves to the extremes most investors count on it moving to - at least not in a straight line. While I wouldn't live and die by assuming the average rally and average correction (of 15.4% and 9.8%, respectively) is where we start and stop these major moves, I also wouldn't fight the odds either.  That's my long way of saying I'm not quite ready to dive back in just yet, but I will be ready soon... probably about the time the doom-sayers dominate the headlines again. That should be roughly 3% to 5% south of where stocks are trading now, in line with option traders' max pain assumptions. I'm sure I'll be in the minority, but that's fine by me; I've made most of my money in the market by being in the minority.  Helping you get more out of the market, James Brumley Editor - Small Cap Network    From The Community  - Latest Commentary - Does Engineering Technology Pay Off? JEC, SAI, BRC, ACM, ESLR, and TTEK Dennis Askew has pinpointed one of the best - and perhaps unknown - companies within the engineering technology arena....AECOM Technology (ACM). Everything is growing - earnings, revenue, and most important, the stock's value. Just compare ACM to its peers.  Traders' Thoughts on Key Small Cap Stocks: FFI, NTES, MYRX, AEN New contributor Bryan Murphy has been digging deep into the small cap world to find clues that the market may have missed, and he found a big one with Myrexis, Inc. (MYRX). While not entirely unheard of - even in the biotech world - this is a case where the raw breakup value of the company is bigger than the current share price, and the market's assigning no value whatsoever to the Azixa technology even though it's tested well in Phase I. Check out these numbers.  People Are Eating Out Again, Are You In on the Profits? CAKE, DRI, EAT, WEN, TXRH, and BOBE Hungry for profits now that consumers are hungry for restaurant food again? Taste a little of The Cheesecake Factory (CAKE), says Dennis Askew. He's got the skinny on it as well as several other restaurants now that the recession is letting up and these restaurateurs have learned to run lean and mean. A Strong Year, A Strong Quarter, A Strong Future: Fieldpoint Petroleum (FPP) Looking for high-payoff oil play with better-than-average odds? Dennis Askew has dug one up.....Fieldpoint Petroleum Corporation (FPP). It's an independent driller, and just won a contract with a major. While that's a positive, it doesn't do the deal and the opportunity justice. There's a real shot of the company's newest drilling site leading to a double in the size of the company. Cardium Announces Co-Development and Strategic Licensing Agreement with BioZone Laboratories Biagio Rao is the Small Cap Networks resident expert on, and chief follower of, Cardium Therapeutics (CXM), so it's fitting he offers up the latest news. And as he accurately pointed out, it's interesting that the company newest partner - BioZone - was willing to take shares rather than cash. Here's the scoop.    We Value Your Feedback Got comments, questions or suggestions? 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