Month of Change Ends on Familiar Note

Change your direction.

You ain't gonna change it.

Can't rearrange it.

Can't stand the pain.

Failing miserably to build on Thursday's big rally, major averages tumbled into the weekend leaving some (older) traders humming a few bars of Aerosmith's classic "Same Old Song and Dance." (It's from 1974!)

Weak personal income data and Dell's disappointment were cited as catalysts for daily declines of 1.2% each for the Dow and S&P, and 1.6% for the Nasdaq. But Friday's setback marked a repeat of the prevailing pattern where sustainable gains remain elusive and seemingly every up day is met with an equal (if not greater) down day. A bear market is what a bear market does.

Actually, Friday was a reversal of the pattern seen in the month of August, which itself was a reversal of the prior several months. (So a reversal of the reversal. Got that?)

August was characterized by strength in stocks - led by consumer discretionary and tech names - and the dollar, accompanied by weakness in commodities; most notably oil, which fell 22% from its mid-summer high before finding a floor.

For the month, the Dow rose 1.5% while the S&P gained 1.3% and the Nasdaq climbed 1.8%. Consumer Discretionary was the best August performer among the S&P's 10 industry groups with an 8.1% rise, according to Bloomberg.

At this point, August's advance - and the bounce off the mid-July lows - can best be described as a bear market rally. I mean, do you really think hotel, retail and restaurant stocks can continue to lead given the trends of falling personal income, higher inflation and rising unemployment?

Still, bear market rallies tend to be impressive and last longer than most traders expect. That being the case, and with many pundits already talking about how September is historically the worst month for stocks, there's probably more gains to be had before the bear reasserts itself. (Strength in September and October would probably surprise the most traders, something the market has a proclivity to do.)

In the very short term, there's a lot of economic data packed into next week's holiday-shortened week: construction spending, factory orders, ISM reports on services and manufacturing, plus Friday's all-important jobs report.

On that note, a healthy and happy holiday weekend to all, and thank you for tuning in and helping make "Tech Ticker's" first seven months a success. It's been a great ride so far. (Now, if we can stick around half as long as Aerosmith, that will be something. )