Weekend Analysis for Fri August 8th 2008

There can be no denying that yesterday looked like death to the markets. The market had plenty of bad news from jobless claims and earnings reports from financial's that set things up to move down. The market didn't disappoint on that front. it fell hard and ignored all the great divergences on those weekly charts. Some selling is always possible but you just don't expect that type of selling with what should be protection from those weekly charts. Today the futures were down a little bit and things started out slowly but it didn't take long for the losses to be wiped out and for the market to surprisingly move higher step by step until it was clear that a special day was under way. A day that would easily wipe out all of yesterday's looses and add on quite a bit more. Those weekly's ultimately did put a floor underneath this market but they did it after driving all of us nuts. The internals were fabulous thus confirming the move. On top of that the Nas put some real distance away from the 50 day moving average. The Sp closed right on it and the Dow cleared 11,698. Excellent action with solid looking daily's to boot. A little more on the Sp and everything will be on breakout. We are overbought some and thus some selling can occur but I think the Sp will make a move away from 1293 with some force shortly. The Ndx took out 1900 which was massive resistance. We have included that chart tonight and you can see there's some real room to run and thus the reason for the Aapl chart. It is the most heavily stock in that index.

It is very sexy and a wide held belief that once this rally does top out the market will get annihilated. I'm getting plenty of messages from folks showing me the opinions of others who are respected in this industry and they are saying that things will get very nasty once this rally completes the move. They may all very well be right. Certainly the market has enough bad news around that you could make a great argument in favor of that type of outcome. The thing that makes me wonder about all of that is the daily charts have a huge impulsive looking Macd. Add to that the huge positive divergences on the weekly index charts and it's hard for me to imagine some of these calls for Sp 1070 to 1150. Again, I'm not saying it won't happen. Of course it could but I have to say it makes me think long and hard about those possibilities. The charts just aren't flashing that message at this moment in time. If it changes I'll give in to it but for now I have to say I don't see that type of carnage to come once this rally does complete its move.

The oil and commodity story is clearly one of the catalysts for this rally and not just the nonsense you're hearing that we have to have a rally from time to time even in a bear market. With oil and all other commodity stocks crashing down all around us the economy is having things taken care with regards to inflation without the feds having to raise rates too quickly. Inflation fears are naturally easing and the dollar is soaring. I believe we will not come close to ever seeing the old lows just made on the dollar. It has seen its ultimate bottom. Gold and silver are in absolute free fall and so is steel, oil and everything else called a commodity. They will always have rallies higher but the long term story is one of lower prices. I know that thought is completely in the minority but it hasn't failed me yet as those terminal tops suggested a long ways back to which I warned all of you to. Don't expect anything close to what we saw down the road. Just my humble opinion.

1326 is the next level of resistance on the Sp once this level near 1293 can clear a bit more. For the Ndx you can see on tonight's chart that 2000 is the next huge level of resistance. There is room for more here folks and we'll just have to watch to see how any overbought selling gets handles but with today's clearing of 1293 SP, 11,698 Dow and with the Nas on a clear breakout things are looking promising for more upside in the near future intermingled with some bouts of selling. Nothing is a straight line but you have to respect the message of the market and it's saying it wants more upside overall before running out of steam. Always pullbacks but today really did a lot to help the bullish case near term. The Sp 1260 bear flag low held and you can't just ignore that. The Nas has broken out and retested and then blasted off. This is how a healthier market is supposed to behave. I'm not saying things are all go here. Not by a long shot. Just suggesting things are healthier and to expect more upside before this rally runs out of steam.

Have a great weekend and if you have a chance, spend time with some kids. It'll make you feel good and help you forget this market which is a good thing sometimes.

Peace

Jack