While I still think the market will resolve this long period of consolidation to the upside, what I know is that between 1265 and 1302, the market is not telling us anything useful. It is just consolidating. So no one can tell you which direction the market is going to go next until the market itself tells us by either decisively breaking 1265 to the downside or 1302 to the upside.

That could happen this week week, as the portfolio managers come back from the beach. The first few days after Labor Day will show their initial bias, bullish or bearish, and then if the other side cannot turn that tide, we'll know what the major trend is.

If that trend turns out to be down, I expect the weakness to come from and be focused in the homebuilders, related retailers, the financials and possibly energy. The home mortgage resets will be about five times as bad in 2009 as they are in 2008, so there is good reason to anticipate weakness in these areas. On the other side, we should see strength in technology, exporters, materials, commodities and the like.

If the trend turns out to be up, it almost certainly will be led by technology and exporters, as the financials have a long way to go before they're back on solid ground. So I think technology is the right sector, whether the next move is up or down, and we should know shortly which direction we'll be dealing with.

We're caught in a trap/We can't get out....

I'm not channeling The King this week; I'm just looking at a market that has been in a long consolidation off the July bottom. Every failed advance and every aborted decline is simply adding to the congestion and increasing the available energy for the next leg, up or down.

This long volatile-but-sideways pattern has established clear breakout and breakdown points on the S&P 500 at 1302 and 1235. That's an awfully wide range, but it is what it is, and from the way the day traders and swing traders are moaning, Mr. Market is doing a great job of throwing everyone off the boat before the ship sails. We all know that September normally is the worst month of the year, and also that a year end rally often starts in late September or early October.

Between lousy unemployment data, Lehman's write-downs and more disheartening housing data, the bad news keeps fueling this decline. Yesterday's massive sell-off completely erased Monday's Fannie-and-Freddie rally, so I can't rule out the possibility of a breakdown back to 1200 or 1180 over the next few days.

But I am even more convinced that the next big move is upward. When we break 1302, and after a brief pause around our old friend 1326, there is plenty of stored-up energy in the form of put buyers, short sellers and sidelined cash to get to 1380 in a hurry.

You might think it's too soon to be talking about 1440, but that's the next critical level--as it has been so many times in the last couple of years, both as resistance and as support.

For now, we simply need to sit and wait. I believe my New World Investor subscribers have the right stocks for the next up-leg--led by technology and holiday spending on consumer electronics, especially in Asia. Healthcare should also do very well.

I'm still convinced oil prices are headed for $80 to $100 as the peace process unfolds in the Middle East, but a massive hurricane or a cold winter could easily pop them back up. So if you own any alternative energy stocks, hang on to them because my long term outlook supports much higher oil prices.

On Monday, I told my New World Investor subscribers after the market's close that investors seemed most worried about the lack of a solution for the problems at insurer AIG, although both Washington Mutual and Wachovia Bank also had people worried. But that's it for the poster children of the credit implosion. With Merrill Lynch being taken over by Bank of America and Lehman headed for liquidation, getting AIG, WaMu and Wachovia resolved should not take long.

Well, Tuesday night's $85 billion taxpayer-financed bailout of AIG resolved that one. Rumors are rife that WaMu has to find a buyer by Friday, or the FDIC will take them over after the close. That's two. Wachovia may not need to be sold or taken over because they wrote their ALT-A loans a bit differently, but even if there is only one big problem left after this amazing week, I think the market will call that a win.

The next major support level for the S&P 500 is 1152. So far, the market is telling us that it does not know the dimensions of the credit crisis and is not ready to go up, even though the Treasury and the Fed are cleaning up one huge problem after another. With the VIX Fear & Greed Index now well over 30, there is a huge amount of potential energy to push stocks higher once the turn comes. The VIX is now higher than it was at the previous bottom on July 15.

The safest path is to wait for a bounce at or above 1152, a successful retest, and then a breakout over 1210. If that happens this week, the weekly candlestick chart will just show a very long tail that undercuts a previous low-that's a very bullish configuration. These double bottoms are common.

So if the S&P can get down to or near 1152, and then close the week over 1210, the market will be telling you this is a massive buying opportunity.