Weekend Analysis for Fri December 5th 2008

The market spent a good deal of time trading between those two gaps at 1400 and 1500. Each side gave head fakes as to making the move up and out or down and out. Each time the other side was able to step up and prevent the breakout or breakdown from happening. Emotional set up after emotional set up. The one constant being that the daily charts were always in decent shape but unwinding some towards the zero line. Not there yet and in some cases like the Nas, still decently far away at -57. This allows for some real upside if the index could make the breakout and at the very end of today it did just that. Volume wasn't half bad at 2.2 billion and the advance decline line was better than two to one positive on the move up. As the day started off with a strong gap down based on a horrific jobs lost number, it didn't seem like things would go well for the bulls. In fact, i was fairly certain that  a breakdown was coming based on that news. Wrong. The market held four points above the 1400 breakdown and started its move back up. The bulls kept knocking on 1500's door but the bears kept swatting it down. Back came the bulls again and again, refusing to give up the fight and ultimately they won out convincingly. If you check the first two charts provided for you tonight you will see the clean breakouts in the Nas and the Ndx 100. The best part is the bullish look of those Macd's as they are well below the zero line and pointing up while the stochastic's are nowhere near overbought. Neither is the Rsi. This index has the look, as do the rest of those daily Macd's on the other major index charts, of going up to their 50 day exponential moving averages. That's roughly 8/9% higher and that's enough room for some decent gains in new plays that can be put out. There's a lot of stocks and etf's that are looking good and we will choose a few for sure. You never want to fight the tape, even if the fundamental news says no way we rally. keep in mind that the market has been slaughtered and at times you have to unwind and thus the reason bad news will no longer take the markets down. We seem to be in that phase right here. You can see it very clearly if you take the time to look at the weekly and monthly charts of all the major indexes. They are as violently oversold as they could possibly ever be thus it seems it's now time for overall upside over the next many weeks, if not a bit longer. This bear has been vicious and thus it always creates doubt when things look good but this appears to be the real deal and upside should be the way here for the short to medium term.

The thing that's most encouraging in terms of the rally continuing on is the how oversold not only the weekly and monthly charts are, but also many of the daily charts on both a high number of stocks and etf's. Macd's are pointing up from below the zero line and this gives the markets more of a chance to have a directional move instead of the violent back and forth whip[saw non directional garbage we've had to deal with lately. The whipsaw created mistrust and thus the reason why heavy cash has been such an important position. This move should allow a clearer one directional upward move, although not straight up of course, and that will take away some of the emotion we've been living with and thus making trading almost impossible. Again thos 50 day exponential moving averages have a real shot now and here are the numbers to look for. Now remember please, these numbers are declining slightly each day thus they will need to be updated daily but here they are as of today. On the Nas, the level is 1668. On the Dow it's sitting at 9076 and finally the Sp has that figure at 945. Not bad gains from here. If those levels can be reached and we're long, there should be some big gainers ahead. because we're still in a primary bear market, the bears will always fight. Not only that, but there's always going to be the respect that needs to be afforded such a primary market and therefore you don't want to get carried away on the long side but it should definitely be played.

The insurance stocks exploded today on reiteration of earnings now that their numbers are so far depressed. The moves on some were at or either side of 100%. This sector along with the housing sector look to be making their bear market lows for at least a very long time if not for good. That needs to be respected when shorting again in time after the expected upcoming move has topped out. Some stocks have made their bears market lows in other sectors as well but of course that doesn't mean blast off time. They will struggle along for some time once this rally ends. However, some are down near 90% and there just isn't that much more to be squeezed out of them. Many of the commodity stocks fall in to that category. When you have fallen 80/90% but still have earnings, it's time to look elsewhere for the best shorts when the time is right. At least for the near term.

There is no guarantee of anything of course but the market is set up. We have the breakout and we also have those dramatically oversold weekly's and monthly's which should keep a floor under all selling attempts by the bears and trust me, they will try. If you don't want to go long I totally respect that but I would tip toe very lightly with new short plays. I personally don't recommend any shorting now. Do what feels best but be careful. If we hold 1500 and start to take out the top of the gap at 1520, you do NOT want to be short. Over 1520 Nas and the market can really run. I'll have lots of stuff on Monday about all of this regarding potential plays and the whole set up as it unfolds in the morning. Be ready for the possibility of some plays early on.

Enjoy life, have fun and play with a child if at all humanly possible.

Peace

Jack