Weekend Analysis for Sat August 30th 2008

Like clockwork the lateral action continues to be the story of the past two months. We're up big one day on confirming internals including some breakouts of key resistance. The next day the good vibes are gone. When the market has a particularly bad day and things look really awful, the bulls come right back in and protect support and move things back up. Possibly the single most difficult market in the past twenty years over the past two months. I have to say I have never seen so many head fakes based on the proper internals when things either break down or break out. Unprecedented in my time. that's the beauty of the game. Just when you think you have it all figured out, you don't. Keeps you on your toes if nothing else. I know that this reality isn't pretty for the masses, all of you included. This is why we haven't at any time over the past many months had more than 10% of our cash in the markets. Again, 30 is full including the long term port. 3 is large. We can have more briefly but only very briefly and that has been extremely rare over the past 11 months. This market just isn't one to get aggressive with and yes we all know everyone wants loads of plays. Just too much risk for that for sure. With a bad personal spending report this morning on top of a horrific Dell earnings report last night, the bulls never had a chance. A gap down that never recovered. Pretty much a trend down day with naturally the Nas getting hit the hardest due to Dell. Aapl an unfortunate victim. With Hpq having just a fabulous report a few weeks earlier, it was our thinking Dell would do the same. Bad thinking. Markets finished near or at their lows. Back and forth continues.

Oil, even with two hurricanes out there, could not hold significant gains and the Oih and the Uso fell hard after a gap up. The oil story is over but rallies are not. Two months ago with similar circumstances, the Uso and Oih along with the price of oil all would have exploded higher. Again, those days are mostly over. Today they did not explode. All you need to know. There is still a chance Gustav will bring the price up a bit but nothing like what would have happened some months back.

We're at important support here on the Sp at 1280 but we all know the big number, the one that if broken would send the market falling hard and that's 1260. If that happens then a retest is possible but by no means a guarantee. Yes, I don't think we break 1200 and a move below 1260 with a tail would be bullish. We don't even have to go below 1260 although everyone keeps telling me seasonality alone could do the trick. I know seasonality matters but by no means do I believe it's all about that. 1313 is still resistance and unfortunately 1300 wasn't able to hold. If we clear 1313 then 1327 is next. 1240 is support before 1200 if we do lose 1260. Interesting times.

Dell reported bad earnings and many stocks lost big support due to that. Rimm lost 125 support and that's significant. This huge leader had been ping ponging between 125 and 135 for a month and the bears love seeing this beast break. Puts more pressure on the entire sector. Goog is also breaking down. Both of these leaders need to get going to the up side and fast to protect this recent leading sector. If the commodities break down again soon which I suspect will occur, that would put pressure on the Sp and would need the financial's to remain strong to keep it afloat. This horrific market continues to stress out everyone and make life miserable for all. You must not come close to putting in 100% of your money in either long or short. 10-20% maximum. Less that 20% from here until things resolve.

Peace

Jack