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.