Weekend Analysis for Fri May 30th 2008

The action is healthy but getting more labored as the days go on and this is due to those 60 minute charts which are now flashing an overbought condition on their oscillators. Nothing technically bad other than overbought and thus the selling that comes shouldn't be too intense. 2% at most if not less would be my thinking. Many times, when things are healthier from a technical perspective, overbought or some negative divergences can be worked off by moving mostly laterally. A small move lower followed by a handle created by that move lower would be my best guess. I'd stay clear of new plays for a little bit but use weakness to buy is the way for now.

The Sp has now traded and closed over 1383 fro three straight days but has now failed two straight days to get over 1400. It has seen 1404 for two days now but has not been able to close above that magical level of 1400 resistance. Nothing wrong with that due to those overbought conditions I just spoke about. It would probably be best if the markets would pull back some and allow for some of those oscillators to set up where the market can actually climb from without stopping at 1400. When a move up is getting extended it's natural for the market to need a pause in the action. The key is how the selling occurs. If it's on lower volume and on small daily sticks and solid support holds for a few days then that's the bullish confirmation we're all looking for.

When studying the best charts or the leaders if you will, they are setting up in very bullish bases. These bases can take time to get rocking higher. They can be played with while still in the triangle as the market maker, with little volume in the triangle, can play with it to try and shake folks out. If you can be patient, these wide bases, when the breakout is made, can run up fast. They can be boring for a while but they are worth the wait. The move up and out can happen very fast. Best not to give up on them. Tech is setting up best for sure. The bases are more mature and growth is being gobbled up faster than financial's as most of us can understand. Tech will lead so after some selling, that will be the best place to find the best patterns and bases.

The dollar chart is starting to look better and while there are no guarantee's of course, it seems as if the dollar is about to start acting much better. Not straight up but the pattern and the oscillators are quite good these days. The best they have been in quite some time so that's worth noting. Everyone hates the dollar and thinks it's doomed forever. Maybe that'll be the case but the charts sure don't at this moment in time.

If you're bullish the best part about the past few weeks is how pessimism has ramped up. Once again we saw consumer confidence go in to the toilet this morning. Folks are just not feeling good about things these days. Never be short a market when people hate it. Sure small selling episodes but this is the time when you have to be brave and buy the weakness without hesitation. It isn't easy I know but it's what has to be done in order to be in ahead of the crowd. That will be the way the service plays going forward. I feel buying weakness will pay off in spades.

For now let's be a bit patient as we hope for some selling to unwind those nasty overbought but healthy longer term oscillators. Capital preservation. Holding current longs and adding on weakness. Things may not feel good out there but I think the market is sending a message we'll all like fairly soon.

Peace

Jack