My outlook for the broader market just got worse. Tough cards have been dealt for anyone affected directly or indirectly by hurricane Katrina, and it's a blow for our economy. With the market focused so strongly on energy, Katrina's affect on oil production and refining capacity will be significant. On a personal level, I can't help but feel really bad for those people whose lives have been turned upside down by Mother Nature.

It's going to be a tough time for the stock market over the near term. We're entering a period that's traditionally weak for stocks, and at the same time we're dealing with high energy costs and rising interest rates. Third quarter GDP is likely to take a hit.

With this reality, caution is the name of the game. I don't feel good about large-cap stocks. With market sentiment waning, small- and micro-cap stocks aren't likely to do much over the next month or two. This is why it's a good time to be sitting on the sidelines.

I've mentioned all sorts of exciting, well-managed companies in this column, and I certainly think these companies will continue to do well. What concerns me most, however, is market psychology and sentiment over the near term. With continuing shocks to the economy, all stock prices are vulnerable right now.

If you've taken on some commodity related investments recently, you've got to keep holding them. As mentioned previously, I believe this will be the only market sector that will outperform, going forward.

As we leave the summer driving season, the demand for heating oil and natural gas will pick up. The energy price commodity boom isn't going away.

As far as I'm concerned, the best thing investors can do right now is wait. Keep your winners, cut your losers, and wait and watch for select new opportunities.