The market is in a mega-oversold state. No matter what indicator you use, no matter what time frame you use, you are going to see that most indicators are in oversold territory. This does not mean you ought to start getting bullish by any means, but in bear market conditions, you have to prepare for the sharp rallies. This is why every few months or so I make a call to arms and advise most of my readers to adapt to these conditions and make a few subtle changes. Such as adjusting time frames, taking profits more quickly, being more conservative with your option selection process, etc.

While I don't think the time is right to make any drastic changes, I caution you to watch for sharp rallies on the horizon. Whether or not this means that you start taking profits more quickly, that is up to you. I might start to scale out of positions after I get a good portion of the move, in order to lock in profits, but I don't want to close positions too quickly and miss the trends we've been following (energy, financials, casinos, china, etc). I might start taking counter trend trades again, which is something I only do in these types of conditions. I might have to break out my "Bottoms" scan today and find a few candidates. Last time I ran this scan I highlighted USNA, OYOG, and XL in the "Best Looking Bottoms" segment of the 5/12 watchlist. 2 out of 3 ain't bad, especially when we flipped the script on XL and made ridiculous sums of money anyway.

In other related news, I just finished writing an article for my "Kohler's World" column in equities magazine, and I decided that I would highlight the upcoming meltdown in the online brokers. Take a look at a few of these charts and see what I mean...

AMTD- 5 Year chart; triangle. I expect a reversal here.

OXPS- 5 year chart, old support acting as new resistance. A good channel breakdown on the 1 year.

SCHW- 5 year chart, a pending head & shoulders pattern.

I plan to highlight a few more individual trades I will be taking. If you have a comment about the timeliness of my delivery, feel free to kiss my ass. At least for the time being, until the solution presents itself. Which happens to be very shortly.