STOCKS ARE GOING BACK ON THE DEFENSIVE

SHORT-TERM BOUNCE HAS RUN ITS COURSE ... This week's modest rebound in stocks has been unimpressive and appears to have run its course. Lack of upside volume and weak breadth also show that investors have stayed on the sidelines, or have sold into this week's rebound. Sector leadership has also been more negative than positive. Continued selling in financials, materials, industrials, and consumer cyclicals have undercut any rally attempt. The same is true with weak small caps and transportation stocks which are hitting new lows. At the same time, money continues to flow into defensive sectors like utilities, staples, REITS, and pharmaceuticals. Foreign stocks are selling off today and U.S. futures prices call for a lower opening. All of which suggests that this week's short-term rally attempt is failing. Which also reduces the chances for a yearend rebound. We'll take another look at things later in the day, and will post a more in-depth analysis over the weekend.