The Dow opens this morning just 2.5% above its October 2002 low of 7,286.27. If the market closes below this level today or violates this support level over the next several days then we're in no-man's land or in unchartered territory as it pertains to the stock market.  

With the Dow Transports already violating its November lows and other indexes also breaking down, the odds are high the Dow Jones Industrial Average will confirm the primary trend, which remains bearish.

The market has been breaking down since the start of February with many more stocks hitting new lows, the advance/decline line collapsing and buyers largely a scarce commodity since late January. And according to Lowry's Reports, which tracks buying and selling pressure, stocks have not bottomed. Lowry's has studied stock market lows since the 1930s and believes stocks have further to fall as an avalanche of panic-related selling has yet to emerge to mark the absolute market bottom.

The banking sector is the key to this bear market tragedy. If the stock market is to regain its footing it must get that traction from the financial sector, which unfortunately continues to bleed profusely since mid-January as fears of government nationalization grow increasingly likely. America's largest banks, largely insolvent, will have to be either partially or fully nationalized by Uncle Sam. The KBW Bank Index has crashed 51% this year and is down a dizzy 75% over the last 12 months.

One of the few stocks I continue to own, Nestle of Switzerland, posted better than expected earnings yesterday as the stock surged more than 5%. That's about the only dose of good news in my razon-thin stock portfolio lately as every sector of the market, except gold mining, continues to decline.

Overall, my stock portfolio is the smallest since 1999 with only a few names -- including Nestle, Kraft Foods and McDonald's. I continue to own investment-grade corporate debt, mortgage-backed agency debt and plan on increasing my holdings in TIPS or Treasury Inflation-Protected Securities.

Gold and silver are also big holdings and I plan on raising my gold allocation following a brief correction, should this materialize. I originally bought gold in 2003 at $365 an ounce and doubled-up last fall when gold pulled back at $744 an ounce. I'll do the same if we correct to $925 or $900 in this cycle, which might occur shortly and if only briefly.

Foreign currencies are still in the midst of a major draw-down. All currencies are now down versus the dollar this year, including even the yen. Only the Norwegian krone and Chilean peso are posting gains. It's still too early to delve back into other currencies because the growth cycle is still contracting and deflation is spreading overseas. Gold is my favorite currency in this mess -- and it's rising against all currencies since 2005, including the yen recently.

This historical bear market is not over. We're going to see sharply lower new lows before this trauma is over and more pain for the market, the economy and domestic consumption. The government's spending plans should boost growth but not until 2010; I'd be far more confident if Congress would attack the housing crisis with everything it's got instead of dealing with the problem on an adhoc basis, channeling what really amounts to as pocket-change to fight real estate deflation.

Stay liquid in short-term T-bills and 1-3 year Treasury bonds and short-term German government bonds. The greatest buying opportunity for stocks since 1982 or 1932 lies ahead. Be prepared.

Have a good weekend. See you on Monday.