Oversold conditions, Greece bailout and end of the month window dressing have all contributed to the bounce over the last four days.   As anticipated we are now hitting the top of the downtrend line so next week will be critical to see if it can hold and began to turn our weekly SELL signals back to a BUY signal.  Fund flows are still very negative with more than $5 billion coming out of equity funds while risks have not waned by any means the market pundits are back on the "buy the market" scheme.

There are quite a few headwinds still ahead of us included more economic data that are most likely still going to point to a weaker economy, earnings could be getting a bit dicey this quarter and oil prices are still at levels that are picking away at consumer spending.  Sentiment by consumers is in the tank, small businesses are contracting rather than expanding and the debt ceiling negotiations are going to be one for the history books most likely.

With all that in mind the point here is that the markets are still in a very weak position and still in a downtrend.  Until that changes we don't want to be aggressive buyers.    In order for us to adding to equity exposure we need a good breakout of the downtrend channel, a pullback to support without violating it, and some volume confirming that the selling blitz is over.   While all that sounds very technical all it is saying is that we are waiting on the light to change from "red" to "green" before trying to cross a busy intersection.    Generally, running out into the street in the middle of oncoming traffic doesn't work out very well.

With that being said while the rally over the last 4 days has been impressive it is very akin to the type of rallies that we saw during the decline last summer.   We are still in "sell the rallies" mode until the trend changes.