The market is as deeply oversold as it has been in the last 3 years. Some may view this as the kickoff to a new downtrend in the bear market, but I don't think so. The action this week reminds me of August 2007 when a hard selloff drove markets down near the March 2007 panic low. This was followed by a rally to new highs that was in fact the final high for the 2002 to 2007 cyclical bull market. I think that we are in a similar position now. We should see new highs this summer, but it may prove to be the final high of the 2009-2010 cyclical bull market. I am still leaving the door open for a continuation of the cyclical bull market after a deep correction this fall, but this week's action is most likely not the beginning of that correction. It is, however, the warning shot across the bow.
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