The Two Forces Against this Market

There are two forces against this market as we begin the fourth quarter and both are palpable: analysts who downgrade at the drop of a hat and charts that are ugly as sin.

The first has been a hallmark of this whole advance. This morning we get downgrades like those of Fifth Third FITB and Allstate ALL from analysts who say they have run too far. Of course these stocks, while up more than 20% and 40% this year, have done nothing over a number of years. But that doesn't matter. They are considered valuation stretched. I have five of these downgrades to every one upgrade.

Second, when I went through the charts this weekend I was stunned that there are so few viable ones. Most are confirmed double charts and just look like classic shorts. They are rolling over as if everyone knows that the future is cloudy and the estimates are high.

A bull would counter that this downgrade process has been going on forever. But when I read these downgrades and look at the charts I can see where people would fade any all-out market strength and attack individual securities.

Just a tough set-up, but one we have seen defeated by the bulls time and time again. The expensive words here? This time it is different.

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