A storm is brewing...

How easy we forget. We’ve had one heck of a run up in the markets since August 2006. That’s great, I love a bull market as much as anyone else. But just like in nature, “what goes up, must come down.”

The last week has not been that great for the markets. Earnings disappointments, oil prices, and inflation – the usual market movers were again at the top of trader’s minds. And we can see that the upward momentum that was in full force during the last half of 2006, seems to be dissipating in the first month of 2007.

Could this be a breather before returning to new highs? Or could this mark the beginning of a consolidation period.

What do you think?

Personally, I think a new storm is brewing. I mean, sure we can talk about how earnings are not as stellar as previous seasons, or how inflation is still a threat, or even how foreclosures are rising in the real estate market. I just don’t care to speculate on what could happen. I just see what is happening at the moment.

And I think that’s where the emotion comes into play. First you have your hard-hitting bulls who are dumping money into the current state of the market, despite the enormous profits they would have seen in the latter part of 2006. Then, you have your bears who are screaming that the markets do not make any sense.

Fair enough.

But just like any technician will tell you, let the charts do the speaking.

Speculating is costly.

As the bears who were slaughtered thus far, and may just be able to regain some of their money should a pullback be fulfilled.

Watch the sky.

Tell next time,

Happy Trading.

Kunal Kalsani