"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

The rally off the July lows has been rather muted. This lack of conviction tells me that the vacationing senior traders told the rookies to "hold the stock market in a trading range until we get back".

This being said, I believe when the senior traders return, the Standard & Poor's 500 has a better than average chance of re-tested its July lows. In fact, the macro news is bad enough to assume the S&P could break below the July lows, and put in an important market bottom sometime this fall.

From the July 15th lows to the August highs have allowed the S&P, DJIA, and the NASDAQ to rally 9.4%, 9.6% and 14.11% respectively. Since this rally was produced from oversold levels. falling oil prices have helped to preserve the gains. However, now with the prospects of a major hurricane threatening the gulf, oil prices are creeping higher.

Without a hurricane, we felt the S&P could rally to the 1,325-1,350 level, and the DJIA could run to 12,000-12,250 before encountering resistance. This was all predicated on the cooperation of lower oil prices. Hurricane Gustav's current tracking projections put the storm just south of New Orleans. Any interruptions of the majority of drilling platforms will not be good news for the price of oil.

Lower oil prices have helped to alleviate pressures on the consumer, but questions about future write-offs in the financial sector will continue to weigh the market down. Until investors can see the light at the end of the tunnel in the financials, a new bull market cannot begin. As such, I continue to believe the recent oversold rally will eventually fade.

Oddly, the stock market is at the same level as it was two months ago. On June 27th, the S&P closed at 1,278.38, and today its at 1,276.89. So, I guess the instructions from the senior traders are being followed- "Hold'em in a Trading Range Until We Get Back".