The market this year has had some rough times. The rally which started in March of 2009 topped out in April of 2010 and caused the market to trend lower for the last 5 months. But as mentioned in my last article the market is approaching a moment in time when a solid buying opportunity will emerge.

On the bearish side of the equation we have weak economic growth, stubbornly high unemployment, massive budget deficits, and a weak banking sector. There is also the issue with the Hindenburg Omen, for which a downside move of just a few more percent would make the signal a success.

On the bullish side we have an equities market that seems overvalued from a PE perspective is undervalued based on dividend yield when compared with similar yields on US Treasuries, AAII surveys showing that small investors are bearish, and favorable profit growth in the large cap sector.

The stock market has in many way mirrored the returns of the market in the 70’s where we had whipsawing action sideways for many years until inflation was dealt with by Paul Volker and set the stage for the great bull market in equities that ran until 2000.

Intel’s announcement guiding revenues and gross margins lower in the third quarter may be the harbinger of earnings warnings in the tech sector as companies move to get the bad news out early.

September is a month where earnings and economic worries are likely to provide some stormy weather for the markets but once we move into the fourth quarter the skies should clear for a nice rally into 2011 although we are likely to end the year on the downside.

As mentioned before, there are a number of high quality blue chip stocks with attractive dividend yields that can provided comfort to investors with a steady income stream. Once the weather clears these stocks should lead the market higher as investors look to dividends for safety in these turbulent times.

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