My, Oh My, What A Difference A Day Makes...

DJIA + 485.21, +4.68% SP500 + 58.32, +5.27% NASDAQ Comp. + 98.60, +4.97% Russell 2000 + 21.86, +3.32% Exchange NYSE NASD Advancing 2,790 1,948 Declining 705 1,025 Oil $100.64 +$4.27 Gold $880.80 -$13.60 $SOX 306.89 +13.58 Strongest Sectors: XLF +7.11%...XLE +6.12%...XLK +4.47% Weakest Sectors: XLV -0.33%...XLI +0.98%...XLU +1.56% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK The word out Tuesday evening is that the Senate will vote Wednesday evening on an improved financial rescue bill which is expected to pass and that the House will vote again on Thursday and reportedly has the support for the changes in the enhanced version of the rescue plan. Watch for this development and the market response to this pending development on Wednesday and Thursday. The Financial Sector, XLF, which was Monday’s weakest sector was the strongest sector on Tuesday. The Energy Sector, XLE, which was the second weakest sector on Monday, was the second strongest sector on Tuesday. Yes, you guessed it, the Tech Sector, XLK, Monday’s third weakest sector was Tuesday’s third strongest sector. My, oh my, what a difference a day can make. On Monday all nine sectors were down and on Tuesday eight of the nine sectors were up. Only the Health Care Sector, XLV, was down 10 cents or 0.33%. Gold and Oil traded places from Monday to Tuesday. Gold was up on Monday but down more on Tuesday. Oil was down over $10 a barrel on Monday and gained just over $4 on Tuesday. In our Stocks watchlist no stocks were up on Monday and there was only one stock down over 70 cents on Tuesday. HANS again moved above its 30 horizontal breakout level. KRE in a bull flag pattern formed an inside day as it bounced off its 30 DMA on Wednesday. NTRI formed another lower low on Tuesday in its bull flag pattern. Index Commentary The DJIA rose above the R1 of Monday’s large black candle and just barely past the July 15 horizontal low…if this R1 breakout holds action could be moving back into the trading range which began on July 15. The SPX moved above the R1 of Monday’s large black candle and is still below its July 15 horizontal low, now resistance….formed a bullish harami on Tuesday. Look for confirmation on Wednesday…a close above the body of the harami day. The Nasdaq closed above the R1 short-term resistance of Monday’s candle and formed a bullish harami pattern…watch for confirmation on Wednesday of harami…still below the July 15 low which is now resistance. The SOX formed a bullish harami at closed at the R1 resistance of Monday’s candle. The RUT formed a bullish harami that closed above the R1 level of Monday’s candle…is trading above its July 15 low and above the key 650 support area. Tuesday’s Action Moving Up: BIDU, AMZN, MA, FSLR, ANR, CF, GS, ESRX, BUCY, X, SOHU, CLF, DECK, CNX, FWLT, MOS, ZION, BTU, INFY, NIHD, V, MER, FMCN, MEE, NUE, KBE, HANS, EBAY, DRYS, NDAQ, SINA, MS, AGU, MON, PCLN, BRCM, EXPE, COH, LAMR, IPI, RF, SCHN, Moving Down: AEM Intermediate Term Market Trend: Down Short Term Market Trend: Down

Uncertainty Prevails...Markets Break Support

DJIA - 777.68, -6.98% SP500 - 106.85, -8.81% NASDAQ Comp. - 199.61, -9.14% Russell 2000 - 47.07, -6.68% Exchange NYSE NASD Advancing 202 422 Declining 3,333 2,557 Oil $96.37 -$10.52 Gold $894.40 +$5.90 $SOX 293.31 -28.31 Strongest Sectors: XLV -2.24%...XLI -3.39%...XLP -3.75% Weakest Sectors: XLF -12.18%...XLE -11.89%...XLK -8.65% Sector Watch Up Trending: Sideways: XLF, XLV, XLP, XLY Down Trending: XLI, XLE, XLU, XLB, XLK Futures are up in the early Tuesday morning hours: DJIA +130...S&P +19...Nasdaq +19...RUT +9 It is a long standing observation that there are two things that Wall Street (big money) doesn't like. One is negative surprises and the other is uncertainty. Well today we saw the continuing drama that has been unfolding since last Monday when it became apparent that there would be some negotiating that needed to take place before Congress would approve the request for $700 billion for a lifeline to the financial sector. Wall St. waited patiently last week and when the House bill failed today...Wall St. sold in a big way. The markets broke support and the rest is now history. From a practical point of view it still doesn't seem to be if, but rather when will Congress act. Until they do, the markets showed us today that we can expect volatility to be high. Monday was the largest point drop in history for the Dow. Obviously failure to pass a financial rescue bill was the primary catalyst for the selling spree. We suspect that much of the selling was computer programs that sell when markets reach certain key levels.

Using stops likely paid off on Monday and bearish strategies worked even better in most stocks.

The financial stocks short ban runs to October 2, unless it is extended. There were actually a few stocks that were not in the soup today...here are two to look at their charts: CPB, AITP HANS fell through it breakout support to its 20 and 30 DMA where buyers stepped in...looking like a potential bull flag pattern. KRE fell to its 50 DMA where buyers moved in and the ETF rose $2.50 from its intra-day low. NTRI bull flag support bounce failed on Tuesday and it formed a new low day...watch for potential bounce in this bull flag. Index Commentary The DJIA, SPX and Nasdaq closed below the Sep 18 low...the middle of Monday's large black candle is R1 and any rally will need to break this short-term resistance...Monday was a new 52-week low. The RUT fell to its 650 support zone where it previous found support in January, March and July...continues to hold above support...Monday's R1 level is the short-term horizontal resistance. Monday’s Action Moving Up: None in Watchlist Moving Down: BIDU, FSLR, CLF, DECK, GS, MA, POT, X, ANR, MOS, CNX, AGU, SCHN, MON, PCLN, BTU, NUE, MEE, FWLT, ZION, ESRX, STRA, RF, KBE, SOHU, CF, AMZN, DRYS, NIHD, BUCY, LDK, MER, INFY, V, FMCN, LAMR, KMT, EBAY, EXPE, COH, JASO, BRCM, ONXX, MS, SINA, GRMN, GDX, AEM, IPI, NDAQ, HANS, DRE, PNRA, UAUA Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Still Waiting For Resolution...

DJIA + 121.07, +1.10% SP500 + 4.09, +0.34% NASDAQ Comp. - 3.89, -0.15% Russell 2000 - 0.97, -0.13% Exchange NYSE NASD Advancing 812 1,223 Declining 2,023 1,682 Oil $106.89 -$1.13 Gold $888.50 +$6.50 $SOX 321.62 +1.73 Strongest Sectors: XLF +2.74%...XLY +1.00%...XLK +0.48% Weakest Sectors: XLE -2.66%...XLB -2.33%...XLI -0.41% Sector Watch Up Trending: Sideways: XLF, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK The DJIA moved higher on Friday on the strength of JPM which acquired the deposits of WM Thursday night, BAC, AXP, C and CAT while the other broad indices were mixed. The Financial sector, XLF, was the strongest sector for the second day in a row suggesting that buyers believe Washington will find a finacial bailiout resolution shortly. Declining stocks led advancers by more than a 2 to 1 margin on the NYSE. Inflation related stocks oil, gold, coal, solar, basic materials, steels and ag-related were some of the biggest losers on Friday. KBE confirmed with bullish harami with a bullish engulging. HANS bounced off its horizontal breakout now support and closed above its open. NTRI had a classic support bounce off its 200 DMA in a bull flag pattern.

Index Commentary The DJIA followed Thursday's bullish engulfing with white candle that rose to the 20 DMA.

The SPX formed a hammer that was also an inside day.

The Nasdaq bounced from its 2,150 horizontal support again on Friday.

The RUT formed a hammer at support. Friday's Action Moving Up: GS, ZION, ESRX, MER, COH Moving Down: CF, BIDU, FSLR, AGU, POT, MOS, MA, CLF, DRYS, SOHU, ANR, MEE, MON, PCLN, V, BUCY, MS, X, SCHN, IPI, AEM, CNX, SINA, NUE, FWLT, BTU, STRA, HANS, LDK, JASO, FMCN, AMZN, NIHD, LAMR, KMT, UAUA, INFY Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Markets Rise...Futures Fall in After Market...

DJIA + 196.89, +1.82% SP500 + 23.35, +1.97% NASDAQ Comp. + 30.89, +1.43% Russell 2000 + 7.97, +1.14% Exchange NYSE NASD Advancing 2,248 1,715 Declining 847 1,198 Oil $108.02 +$2.29 Gold $882.00 -$13.00 $SOX 319.89 +3.95 Strongest Sectors: XLF +2.76%...XPU +2.47%...XLE +2.45% Weakest Sectors: XLB -0.28%...XLI +0.79%...XLK +1.72% Sector Watch Up Trending: Sideways: XLK, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK Markets moved higher on Thursday as it appeared that progress was being made toward a financial bailout resolution in Washington. Futures markets gave back much of Thursday’s gains after the close as the markets heard that a resolution would not be completed on Thursday. KBE formed a bullish harami in its bull flag pattern. HANS continued to rise following its horizontal resistance breakout. Index Commentary The DJIA formed a bullish engulfing on Wednesday’s spinning top…closed below the R1 resistance of Monday’s candle. The SPX bounced above Wednesday’s spinning top and closed below the R1 resistance of Monday’s candle. The Nasdaq confirmed its bullish harami…closed below the R1 of Monday’s large black candle. The SOX confirmed its bullish harami while forming a higher low and higher high. The RUT formed a bullish harami that closed near the R1 level of Wednesday’s candle. Thursday’s Action Moving Up: BIDU, DECK, AMZN, ZION, HANS, KBE, LDK, NDAQ, ANR, MEE, GS, MS, SINA, NUE, ONXX, EBAY Moving Down: POT, CF, MA, AEM, MON, AGU, CLF, CNX, FMCN, DRYS, BUCY, V, PCLN, KRE, BTU, GDX, GRMN, ESRX, Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Markets Still Waiting...

DJIA - 29.00, -0.27% SP500 - 2.35, -0.20% NASDAQ Comp. + 2.35,+0.11% Russell 2000 - 11.42, -1.61% Exchange NYSE NASD Advancing 1,239 1,063 Declining 1,820 1,804 Oil $105.73 -$0.88 Gold $895.00 +$3.80 $SOX 315.94 +3.27 Strongest Sectors: XLV +0.93%...XLU +0.92%...XLE +0.30% Weakest Sectors: XLB -1.98%...XLF -1.12%...XLY -0.35% Sector Watch Up Trending: Sideways: XLK, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK

The market traded in a narrow range as it seemed to be waiting on word from Washington on the financial bailout. Decliners still led advancers although there were more advancing stocks on Wednesday that on Monday and Tuesday. Oil moved lower on a report that demand for gasoline over the past four weeks was down 3.5% from a year ago. Small cap stocks were down more than 1.5% as buying was weaker in this market segment. Many of the financial stocks we mentioned in Tuesday’s post were near unchanged. Decliners: CB, BBT, STI, ZION, RF, PACW, KBE Advancers: KRE HANS dropped below its breakout point in early trading on Wednesday, creating what turned out to be a buying opportunity. News reports attribute the temporary drop in price to the Company not mentioning the distribution agreement discussions with Coca-Cola. HANS rallied from its early Wednesday drop and closed back above its breakout level. HANS was down 44 cents on Wednesday. Check your news for more details.

Index Commentary The DJIA formed a spinning top in the area of the S1 support of Thursday’s candle…continue to watch this support level and the R1 resistance of Monday’s candle. The SPX also formed a spinning top in the area of its S1 level of Thursday’s candle…watch S1 support and the R1 resistance of Monday’s candle. The Nasdaq formed a bullish harami while staying above the mid-section of Thursday’s white candle or the S2 level…continue to watch this support and the R1 of Monday’s large black candle. The SOX formed a bullish harami while staying above last Tuesday’s low…continue to watch to see if this index forms a double bottom or breaks below it 305 support level.

The RUT was the weakest index today and fell to the S1 level of last Thursday’s large white candle…still in a sideways trend…continue to watch the S1 support level and the resistance areas of the 20, 30, 50 and 200 DMA as well as the R1 resistance of Monday’s candle.

Wednesday’s Action Moving Up: FSLR, GS, BIDU, SOHU, ESRX, FMCN, AAPL, LDK, NIHD, IBM, BRCM, AEM, POT, GRMN, CF, CELG, AMLN, FRE, FNM, Moving Down: STRA, DECK, MS, ANR, CLF, MA, X, BUCY, CNX, FWLT, AMZN, NDAQ, LAMR, INFY, UAUA, PNRA, MOS, SCHN, BTU, MTL KMT, COH, V, DRYS, AGU, ONXX, LCC, PCLN Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Oil Drops, Stocks Lower As Markets Wait News on Financial Bailout

DJIA - 161.52, -1.47% SP500 - 18.87, -1.56% NASDAQ Comp. - 25.65, -1.18% Russell 2000 - 11.25, -1.56% Exchange NYSE NASD Advancing 872 1,021 Declining 2,220 1,870 Oil $106.61 -$2.76 Gold $891.20 -$17.80 $SOX 312.67 -5.85 Strongest Sectors: XLK -0.05%...XLF -0.29%...XLP -1.34% Weakest Sectors: XLE -2.31%...XLV -2.37%...XLB -2.33% Sector Watch Up Trending: Sideways: XLK, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK The selloff in stocks slowed on Tuesday and technology and financial were the strongest sectors and were near breakeven for the day. After the markets closed Buffett took a major position, $5 billion, in Goldman Sachs, GS, which sent financial stocks and futures higher in after market hours. Don't be surprised if markets are higher in the morning. The November oil contract dropped from $109.37 after the October contract had surged over $16 on its last trading day on Monday in part due to short covering on the closing contract. This sent inflation related stocks in the oil, coal, gold steel, basic materials and Ag-related stocks lower today.

As the details of the financial bailout get negotiated don't be surprised if the market moves significantly higher. Think about it. Look at the trend of the financial sector XLF. The trend stopped moving down on July 15, starting moving up and in many individual stocks the trend is actually moving up. Look at stocks like BAC, WFC, JPM, USB, STI, CB, RF, ZION, CPF, BBT, CTBK, PACW, TRMK and ETFs KRE and KBE.

Buffett's financial commitment to GS should also be a clue of the potential for the financial sector.

HANS closed above resistance on Tuesday and has a chart target of $37.50+.

Index Commentary The DJIA stayed above S1 of Thursday’s candle…watch this support level and the R1 resistance of Monday’s candle. The SPX stayed above the S1 level of Thursday’s candle…watch S1 support and the R1 resistance of Monday’s candle. The Nasdaq was relatively stronger on Tuesday and stayed above the mid-section of Thursday’s candle or the S2 level…watch this support and the R1 of Monday’s large black candle. The SOX fell within 5 points of last Tuesday’s low…watch to see if this index forms a double bottom as confirmation if the Nasdaq index reverses trend and begins moving up. The RUT again fell below its 50 and 200 DMA and closed well above last Thursday’s S1 level…still in a sideways trend…watch the S1 support level and the resistance areas of the 20, 30, 50 and 200 DMA as well as the R1 resistance of Monday’s candle.

Tuesday’s Action Moving Up: GS, V, HANS, FMCN, MS, GRMN, FNM, FRE, Moving Down: POT, FSLR, MOS, CF, CNX, AGU, X, DRYS, BIDU, CLF, AAPL, LDK, PNRA, ESRX, DECK, PCLN, MON, FWLT, MA, BTU, SINA, IPI, SCHN, SOHU, MER, BUCY, ANR, MEE, AEM,NUE, GDX, MTL, INFY, STRA, BRCM, LAMR, RIMM, ONXX, IBM, COH, CELG, NDAQ Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Oil Soars, Dollar...Stocks Fall

DJIA - 372.75, -3.27% SP500 - 47.99, -3.82% NASDAQ Comp. - 94.92, -4.17% Russell 2000 - 33.30, -4.42% Exchange NYSE NASD Advancing 446 697 Declining 2,572 2,239 Oil $120.92 +$16.37 $109.37 +$6.62 (November 08 contract) Gold $909.00 +$44.30 $SOX 318.52 -15.39 Strongest Sectors: XLP -0.54%...XLB -1.28%...XLE -1.75% Weakest Sectors: XLF -8.18%...XLY -4.11%...XLI -2.66% Sector Watch Up Trending: Sideways: XLF, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK Oil had its largest one day price increase since 1984 when oil futures began trading on the NYMEX. The jump was fueled by a falling dollar and speculation of an increase in economic growth as a result of the financial bailout plan currently being proposed. There is also the perception that some of today’s buying was short covering on the October contract which expires today. This appears to be an interesting contrast; oil rises due to uncertainty about the financial bailout plan and oil also rises because some believe the financial bailout will spur economic growth. This appears to be the financial bailout is bad and good. Oh well so much for explanations…this much we do know the dollar did fall and oil did rise. The November contract experienced a relatively more modest rise, so it will be interesting to see how it trades on Tuesday. The fact that XLE, the Energy sector ETF, fell 1.75% on Monday shows that the rise in oil prices did not translate into a rise in oil and energy stocks. This could be because traders didn’t think that the rise was more than a speculative pop which they expect to fade. Again we’ll watch with great interest on Tuesday. All sectors were lower on Monday and decliners led advancers 5 to 1 on the NYSE. The Financial sector, XLF, which was Fridays strongest sector gave back most its gains on Monday coming in as the weakest sector. Index Commentary The DJIA bounced down from its moving averages to close at the S3 level of Friday's large white candle...key short term support the S1 level of Thursday's large white candle. The SPX also bounced down at the resistance of its moving averages to close just below the S3 level of Friday's candle...key short term support is Thursday's S1 level. The Nasdaq closed Friday morning's gap and closed into Thursday whitle candle...the SOX was weak on Monday and it is easy to see why the Nasdaq fell further than the other indices...watch the S2 level on Thursday's candle. The RUT closed below its 20 and 30 DMA and gave back more than Friday’s gain...watch the 200 DMA support and the S1 level of Thursday's large white candle. Friday’s Action Moving Up: AEM, POT, GDX, CF, BUCY, CNX, MEE, PNRA Moving Down: MA, BIDU, FSLR, GS, AAPL, AMZN, DECK, RIMM, NDAQ, PCLN, CELG, STRA, LDK, NUE, X, GRMN, V, DRYS, SOHU, EBAY, MER, EXPE, SINA, MON, SCHN, WRC, IBM, KMT, NIHD, COH, BRCM, INFY, UAUA, FMCN, ONXX, LCC, AMLN, HANS, LAMR Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Amazing Gains Day Two

DJIA + 368.75, +3.35% SP500 + 48.57, +4.03% NASDAQ Comp. + 74.80, +3.40% Russell 2000 + 30.06, +4.15% Exchange NYSE NASD Advancing 3,082 2,312 Declining 419 664 Oil $104.55 +$6.67 Gold $864.70 -$32.30 $SOX 333.91 +6.20 Strongest Sectors: XLF +11.84%...XLE +6.52%...XLB +5.75% Weakest Sectors: XLP -0.89%...XLK +0.39%...XLV +0.64% Sector Watch Up Trending: Sideways: XLF, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK Dave was in Ottawa, Canada on Wednesday and Thursday teaching a two day workshop on how to trade stocks and options. Dave returned on Friday and will be in all next week! The headline could read “The DJIA Ended Another Blasé Week Closing Down Just 33 Points.” While the DJIA did close down just 33 points for the week it had its wildest weekly trading range in over five years covering more than 1,000 points between its high and low The DJIA weekly trading range has been less than 600 points over 75% of the time during the past year and only once has exceeded 800 points. In reality the DJIA experienced dramatic declines on Monday and Wednesday only to have equally dramatic rises on Thursday and Friday moving the broad indices back into the trading range congestion of the past several weeks. The intermediate term trend is neutral. The week ended with the Fed and Treasury proposing a $700 billion bailout of the financial system and an SEC ban on the shorting of 799 financial stocks through October 2. Next week should be filled with interesting developments. Stay focused on key support and resistance levels. Index Commentary The DJIA rallied on Friday breaking through its 61.8 Fibonacci retracement from its August 11 high…it closed above its 20 DMA and at its 30 and 50 DMA… The SPX also moved above its 61.8 Fib retracement and closed above its 20 DMA and just below its 30 and 50 DMA. The Nasdaq rose to its 61.8% Fib retracement where sellers pushed the index back slightly…closed above its 20 DMA and below its 30 and 50 DMA and below its 61.8% Fib level. The SOX found heavier selling pressure than the broad indices at its 50% Fib retracement level as sellers pushed the index back below its 20 DMA with a close at its 38.2% Fib retracement. The RUT which closed above its 200, 50 and 20 DMA on Thursday gapped above and closed above it 30 DMA on Friday...sellers appeared at the 761 horizontal resistance area which is where sellers turned the index lower in June and August…Friday was the third highest daily close in 2008. Friday’s Action Moving Up: GS, FSLR, MA, POT, MOS, DECK, CF, AAPL, NDAQ, RIMM, X, AGU, ANR, MEE, MON, NUE, MER, CLF, DRYS, SOHU, BUCY, V, JASO, CNX, FWLT, BTU, IPI, AEM, SCHN, STRA, MS, AMZN, FMCN, IBM, CELG, INFY, HANS, WRC, NIHD, LAMR, PCLN, MTL, KMT, COH, BRCM, GRMN, GDX, SINA, EXPE Moving Down: BIDU, LDK, PNRA, ESRX Intermediate Term Market Trend: Neutral Short Term Market Trend: Up

High Volatility Reversal

DJIA + 410.03, +3.86% SP500 + 50.12, +4.33% NASDAQ Comp. + 100.25, +4.78% Russell 2000 + 47.30, +6.99% Exchange NYSE NASD Advancing 2,373 2,195 Declining 563 778 Oil $97.88 +$0.72 Gold $897.00 +$46.50 $SOX 327.71 +15.64 Strongest Sectors: XLF +7.87%...XLK +4.27%...XLU +3.67% Weakest Sectors: XLB -0.03%...XLP +0.65%...XLV +1.29% Sector Watch Up Trending: Sideways: XLF, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK The DJIA had a trading range of 617 points and the RUT rose an unusual 47 points. The DJIA rose, then fell until 1 pm and then rose into the close in a unusually volatile day. News of changes to short sales rules in the US and the UK combined with efforts by the Fed to developed a solution to the challenges of major financial institutions seemed to give buyers the incentive to step into the market on Thursday. We noted yesterday that the SOX had formed an inverted hammer candle while failing to make a lower low…we alerted you to watch this index for clues to the direction of the Nasdaq. On Thursday the SOX formed an outside reversal day, confirmed its inverted hammer and closed above the high of the low day while rising 5.01%. Index Commentary The DJIA bounced back above its July 15 low…broke through the R1 level and closed near the R2 level of Wednesday’s large black candle…is still trading below its 20, 30, 50 and 200 DMA. The SPX closed above its July 15 low…closed above the R1 and near the R2 level of Wednesday’s large black candle…still below its 20, 30, 50 and 200 DMA. The Nasdaq rose 100 points on Wednesday closing above Wednesday’s R1, R2 and R3 levels while forming an outside day reversal price bar…closed above its July 15 low…trading below its 20, 30, 50 and 200 DMA. The RUT rose 6.99% blowing through Wednesday’s R1, R2 and R3 levels…closed above its 20, 50 and 200 DMA…the low in the RUT on Thursday was a 78.6% Fibonacci retracement…Thursday was a higher high by 0.10 point over the 723.58 on Sept. 12…watch for a break above its 30 DMA at 728.16 for confirmation of a new uptrend. It is not often that the markets have a reversal of the magnitude of Thursday’s reversal. On Wednesday only four stocks made our Moving Up list, on Thursday only one stock makes the Moving Down list. Thursday’s Action Moving Up: BIDU, MA, FSLR, PNRA, PCLN, AAPL, RIMM, AMZN, FMCN, NDAQ, HANS, SINA, MON, CNX, CLF, SOHU, X, ANR, BTU, POT, IBM, DECK, LDK, MTL, ESRX, SCHN, V, MER, BUCY, EBAY, SCHN, AGU, GRMN, IPI, NUE, FWLT, MEE, MOS, AMLN, SNDK, BRCM, ONXX, KMT, STRA, STRA, LAMR, COH, MS Moving Down: GS Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Fall To New Lows...Gold Jumps $70...Oil Rises

DJIA - 449.36, -4.06% SP500 - 57.21, -4.71% NASDAQ Comp. - 109.05, -4.94% Russell 2000 - 34.27, -4.82% Exchange NYSE NASD Advancing 58 468 Declining 2,830 2,505 Oil $97.16 +$6.01 Gold $850.50 +$70.00 $SOX 312.07 -4.29 Strongest Sectors: XLF -1.59%...XLB -1.87%...XLE -2.10% Weakest Sectors: XLF -9.60%...XLK -5.55%...XLU -4.84% Sector Watch Up Trending: Sideways: XLF, XLI, XLV, XLP, XLY Down Trending: XLE, XLU, XLB, XLK What a day... Gold has its biggest daily price rise since 1980... Oil rose... DJIA, SPX and Nasdaq drop to new lows... All sectors fell including XLE... Gold stocks rise... Airline stocks grounded as oil rises... VIX at highest closing level in over 5 years... Russell 2000 still above July 15 lows... One interesting observation is the SOX Semiconductor index forms an inverted hammer and fails to make a lower low. Semiconductors were relatively stronger than broader markets on Wednesday...watch this index closely for clues to the Nasdaq direction. Index Commentary The DJIA closes below its July 15 low...a new 52-week low...its lowest level in three years...large black candle...R1 is 10,860. The SPX closes at new lows...R1 is 1,183. The Nasdaq breaks support to new 52-week low...R1 is 2,138 The RUT fall below its July 8 resistance high of its double bottom formation and is still above its July 15 low...R1 is 690. Wednesday’s Action Moving Up: SNDK, GDX, AEM, PNRA, Moving Down: GS, BIDU, MA, X, DECK, AAPL, CLF, CF, RIMM, AMZN, MS, NIHD, STRA, CELG, IBM, PCLN, ESRX, MTL, MON, SCHN, MOS, IPI, NUE, AGU, POT, FMCN, WRC, INFY, COH, KMT, AMLN, UAUA, BRCM, LCC, LAMR, ANR, SINA, MER, FSLR, V, BUCY, EXPE, EBAY, SOHU, ONXX Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Rally Near July 15 Support Area

DJIA + 141.51, +1.30% SP500 + 20.90, +1.75% NASDAQ Comp. + 27.99, +1.28% Russell 2000 + 20.89, +3.03% Exchange NYSE NASD Advancing 1,442 1,691 Declining 1,265 1,253 Oil $91.15 -$4.56 Gold $780.50 -$6.50 $SOX 316.36 +4.60 Strongest Sectors: XLF +7.49%...XLE +4.23%...XLK +1.88% Weakest Sectors: XLU -1.51%...XLE -0.16%...XLP 0.00% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK Markets rallied from a key long-term support level today in what as of today is a counter trend move in the DJIA, SPX and Nasdaq indices. The Fed announced today they were leaving interest rates unchanged. MS reported after the close better than expected earnings. MS gapped down over $8 Tuesday’s open and rose during the day and closed down $3.49 or 10.84%. In after hours trading the stock rose over 10% or $3.05. Watch for active trading on Wednesday and to see if the down trend reverses over the next several trading sessions. SNDK which closed at 15.04 received a buyout offer from Samsung at $26 cash per share. Stock rose over $7 in after hours trading. Oil fell again on Tuesday to under $92 a barrel. If this down trend continues it will likely prove positive for the economy, retail and airline stocks. We mentioned airlines in Monday’s posting. We have been posting about the potential for airline stocks to rise with the down trend of oil and today they did in a big way. The big five rising between 12 and 23% today. Look at: AMR, CAL, DAL, LCC and UAUA. Also the Fed after the close made $85 billion available to assist AIG, the largest insurer in the U.S. and one of the Dow 30 stocks. AIG employs over 116,000 people. Index Commentary The DJIA fell below its July 15 low on Tuesday and then bounced to close up for the day and closed below the R1 level of Monday’s large black candle. The SPX which broke below its July 15 low on Monday, rose above that support level on Tuesday and closed below the R1 level of Monday’s large black candle. The Nasdaq gapped below its July 15 low and bounced near the mid-range of Monday’s trading…this is a counter trend move until it can make a higher high of last Friday’s close. The RUT which broke through it 61.85 Fibonacci level from its July 15 low on Monday bounced before reaching its 78.6% level and bounced up through its 50% Fib level… today’s rise pushed through Monday’s R1 level…the strongest of the four broad indices…still trading below its 20, 30, 50 and 200 DMA…watch Monday’s R2 and its moving averages as important resistance levels. Stock Commentary These uptrending stocks rose on well above average volume caught out attention today: RKT, ACE, ONB, THG, USB, BKE Tuesday’s Action Moving Up: FSLR, CF, POT, MON, X, MON, PCLN, DECK, LDK, PNRA, RIMM, ESRX, NUE, MOS, MA, FWLT, CLF, AGU, SCHN, ANR, IPI, AEM, BTU, GRMN, CNX, UAUA, ONXX, INFY, AMZN, LCC, NIHD, SOHU, BUCY, JASO, DRYS, EBAY, CELG, IBM, COH, STRA, KMT, SNDK Moving Down: BIDU, V, GS, MS, WRC, BRCM, MEE, SINA, Intermediate Term Market Trend: Down Short Term Market Trend: Down

Indices Break Support Over Financial Concerns...Even As Oil Falls to Chart Target

DJIA - 504.48, -4.42% SP500 - 59.00, -4.71% NASDAQ Comp. - 81.36, -3.60% Russell 2000 - 30.50, -4.23% Exchange NYSE NASD Advancing 36 390 Declining 2,921 3,023 Oil $101.18 -$5.47 Gold $787.00 +$22.50 $SOX 311.76 -10.37 Strongest Sectors: XLP -1.20%...XLV -2.78%...XLY -3.37% Weakest Sectors: XLF -9.74%...XLE -7.66%...XLK -4.83% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK Irony is an amazing thing. For the first time in two and half years the airlines caused us to miss a connecting flight returning from a workshop in Canada, oil drops over $5, airline stocks rise and the market has its worst day in seven years. What was a simple flight with one short lay over turned into a fourteen hour marathon and four cities to arrive home long after the market had closed. Well it happened…concerns over LEH and MER brought aggressive sellers into the market all day long to drive the SPX to new lows and to send the DJIA and Nasdaq to their respective July 15 lows. We can’t remember the last time we only saw 36 advancers on the NYSE. That is an amazingly small number. DTP, LDG and DEE even managed to hit a 52-week high. It will be interesting to see if the market shakes this off like it did the March 17 fall in Bear Sterns or if this is the beginning of a new down leg in the market. Trading certainly will be intriguing on Tuesday and the balance of the week. We remember well the drop on October 19, 1987 when many thought it was the beginning of an even more sever drop when in fact it turned out to be the literal bottom in the market. You might recall our posting during the first week of August, that the oil chart suggested that oil would fall to 98.50. Today it dropped below its chart target from the first week of August. Today the concerns over financial companies out weighed falling oil prices and brought the broad market down to support. With oil dropping most of the airline stocks spent agood part of the day up only to go slightly negative in the last three hours of trading. UAUA and AMR did finish with nice percentage gains of more than 8% each. . Index Commentary The DJIA broke short-term support and fell to the area of its July 15 low.. The SPX fell and broke below its July 15 low. The Nasdaq like the DJIA fell to the area of its July 15 low. The RUT broke through the support of its 200 and 50 DMA. Monday’s Action Moving Up: PNRA, UAUA, AMLN Moving Down: ANR, X, MA, GS, CF, FSLR, BIDU, CLF, DRYS, POT, MOS, MEE, CNX, MON, BTU, SCHN, AGU, NUE, IPI, AAPL, PCLN, RSHOHU, BUCY, LEH, JASO, V, EXPE, IMM MS, FWLT, NIHD, IBM, STRA, LDK, GRMN, AEM, GDX, CELG, KMT, DECK, LAMR, SNDK, ESRX, COH, ONXX, AMZN, BRCM, FMCN, HANS Intermediate Term Market Trend: Down Short Term Market Trend: Down

Stocks Fall, Rally, Fall, Rally, End Near Unchanged...

DJIA - 11.72, -0.10% SP500 + 2.65, +0.21% NASDAQ Comp. + 3.05, +0.14% Russell 2000 + 1.26, +0.18% Exchange NYSE NASD Advancing 1,748 1,379 Declining 1,338 1,463 Oil $101.18 +$0.31 Gold $764.50 +$19.00 $SOX 322.13 -1.76 Strongest Sectors: XLE +3.37%...XLB +3.20%...XLU +1.87% Weakest Sectors: XLF -1.40%...XLI -0.26%...XLY 0.00% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK On Sunday, stock futures were significantly lower, oil prices fell under $100 a barrel and gold moved higher in electronic trading. Reports that about 10 rigs were destroyed by Hurricane Ike in the Gulf and partial closure of refineries in the area seemed to have little impact on the price of oil. Perhaps the news is perceived as positive since the damage could have been worse than it was. Reports indicate that BAC would acquire MER. It appears that takeover talks of LEH are not progressing and is a major factor of falling futures prices. Stocks fell at the open rallied to turn positive, fell close to the early morning lows and then ralled to end slightly up for the SPX, Nasdaq and RUT and down slightly for the DJIA. That's what we call intraday volatility. Commodity related stocks gold, Ag-related, steels and coal had a strong day on Friday. Watch whether a bounce or break occurs near the recent support lows for each of the indexes: Dow 11,037 SPX 1,211 Nasdaq 2,191 RUT 700 Index Commentary The DJIA, SPX, Nasdaq and RUT conintue in a neutral trading range pattern. Watch the support and resistance levels of the trading range for a break in either direction. Friday’s Action Moving Up: POT, AEM, MOS, MON, AGU, X, CLF, CF, FSLR, NUE, CNX, FWLT, ANR, GDX, BTU, SCHN, MTL, NIHD, PCLN, IPI, MEE, SINA, GRMN, BUCY, SOHU, V, JASO, ESRX, FMCN, AMLN, ONXX Moving Down: PNRA, AAPL, RIMM, MS, GS, MER, DECK, MA, AMZN, SNDK, Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Indices Rise

DJIA + 164.79, +1.46% SP500 + 17.01, +1.38% NASDAQ Comp. + 29.52, +1.32% Russell 2000 +1.84, 0.26% Exchange NYSE NASD Advancing 1,323 1,310 Declining 1,698 1,567 Oil $100.87 -$1.71 Gold $745.50 -$17.00 SOX 323.89 +1.95 Strongest Sectors: XLI +2.30%...XLF +2.29%...XLB +1.71% Weakest Sectors: XLV +0.41%...XLP +0.41%...XLU +0.79% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK The broad indices rallied on Thursday, the seventh anniversary of the 9/11 attack, confirming Wednesday’s bullish harami for each index. All nine sectors ETF’s were up. However, decliners led advancers again on Thursday on both the NYSE and Nasdaq. The ratio of decliners to advancers was approximately 1.25 to 1, significantly less that Wednesday’s lopsided 7 to 1. Index Commentary The DJIA confirmed Wednesday’s bullish harami and broke through its 50 DMA and closes as its 20 DMA…continues to trade in a sideways congestion…rose above Tuesday’s R1 level and is still below Tuesday’s R2. The SPX confirmed its bullish harami and is trading slightly above Wednesday’s R1 level and it bounced above its 61.8% Fibonacci level…continues below its 20, 30, 50 and 200 DMA. The Nasdaq formed a bullish engulfing pattern and rose above its 78.6% Fibonacci level…trading below its 20, 30, 50, and 200 DMA. The RUT formed a hammer pattern that confirmed Wednesday’s bullish harami and bounced up through its 200 DMA…closed above the August 26 support low of the recent M Top Reversal pattern…trading above its 50 and 200 DMA. Thursday’s Action Moving Up: MA, BIDU, POT, MON, X, AGU, RIMM, AMZN, BUCY, CLF, CELG, PCLN, MOS, FWLT, CNX, BTU, SCHN, MEE, ANR, NUE, PNRA, ESRX, V, LDK, IBM, UAUA, DRYS, WRC, AAPL, MTL, KMT, COH, LCC, LAMR, SNDK, IPI, GRMN, Moving Down: MER, INFY, FSLR, SOHU, AEM, SINA, GDX, STRA Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Stock Indices Form Bullish Harami Below Tuesday's R1

DJIA + 38.19, +0.34% SP500 + 7.53, +0.61% NASDAQ Comp. + 18.89, +0.85% Russell 2000 + 9.87, +1.40% Exchange NYSE NASD Advancing 1,707 1,633 Declining 1,394 1,245 Oil $102.58 -$0.68 Gold $762.50 -$29.50 $SOX 321.94 +2.64 Strongest Sectors: XLE +3.94%...XLU +1.11%...XLB +0.86% Weakest Sectors: XLF -1.22%...XLY -1.03%...XLK -0.47% The market rally on Wednesday faded during the final hour of trading as indices closed below their highs of the day. Several indices including the DJIA, SPX, Nasdaq, RUT and SOX all formed a bullish harami candle pattern today. Numerous down trending ETF’s also formed a bullish harami including XLE, KOL, GDX, XLB and XME. The bullish harami patterns in the indices failed to close above the R1 level of Tuesday’s large black candle, this indicates a weak rally as of today. Continue to focus on the recent support levels and the near term resistance R1, R2 and R3 levels. Trade accordingly. Many energy, coal, basic materials, metal, mining, gold and Ag-related stocks rose not withstanding the fall in gold prices and slight drop in oil prices. Financial stocks including XLF fell again in late trading with continuing concerns with LEH. Commodity related stocks rose perhaps as both a potential financial crises and Hurricane Ike weather hedge. Index Commentary The DJIA formed a bullish harami and continues to trade in a sideways congestion…continues below Tuesday’s R1 level and below its 20, 30, 50 and 200 DMA. The SPX formed a bullish harami and is trading slightly above Friday’s low and at its 78.6% Fibonacci level…continues below its 20, 30, 50 and 200 DMA. The Nasdaq formed a bullish harami and rose to its 78.6% Fibonacci level…trading below its 20, 30, 50, and 200 DMA. The RUT formed a bullish harami and bounced up through its 50 DMA and closed less than a point under its 200 DMA…closed above the August 26 support low of the recent M Top Reversal pattern…still above Friday’s hammer low. Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK Wednesday’s Action Moving Up: FSLR, BIDU, STRA, MA, X, MOS, RIMM, CF, CLF, DECK, CNX, BTU, AGU, MEE, IBM, POT, FWLT, NUE, DRYS, V, ESRX, WRC, MTL, LDK, CELG, ONXX, BUCY, EBAY, SOHU, ANR, IPI, SCHN, AEM, MON, GDX, GRMN, BRCM, KMT, INFY Moving Down: GS, AMZN, MS, PCLN, MER, LAMR, UAUA, Intermediate Term Market Trend: Neutral Short Term Market Trend: Down

Markets Fall From Resistance...Break Support

DJIA - 280.01, -2.43% SP500 - 43.28, -3.41% NASDAQ Comp. - 59.95, -2.64% Russell 2000 - 25.57, -3.49% Exchange NYSE NASD Advancing 362 560 Declining 2,748 2,328 Oil $103.26 -$3.08 Gold $792.20 -$10.50 $SOX 319.30 -11.54 Strongest Sectors: XLP -0.52%...XLV -0.86%...XLK -1.74% Weakest Sectors: XLE -6.92%...XLF -6.39%...XLB -3.18% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK Markets fell on Tuesday over concerns with brokerage firm LEH on news that a Korean bank backed away from investment talks with the firm. Stocks were hard hit in all sectors over the renewed concerns in financial stocks. Selling volume in the DJIA on Tuesday equaled Monday’s buying volume suggesting the FNM/FRE rally on Monday may not have any lasting power. Decliners led advancers by more than 7 to 1 on the NYSE and with indices closing near their lows of the day gives more weight to the downside. Today’s selling broke through Monday’s S1 level and in some indices the S2 and S3 levels. Failure to break through short-term resistance is certainly looking more like a renewed down trend in the intermediate term trend. Watch both the short-term lows of the Friday and the July 15 lows. Trade accordingly.

Keep in mind that any rally would need to break above the R1 level of today's large black candles to have a chance of reversing today's selloff.

Index Commentary The DJIA fell from Monday’s high and closed at Monday’s low forming a large black candle…closed at the 61.8% Fibonacci level…fell below its 20, 30 and 50 DMA…again trading below its 20, 30, 50 and 200 DMA…is still above last Friday’s hammer low. The SPX bounced down from the resistance of its 50 DMA forming a large black candle…fell to 78.6% Fibonacci level…fell below last Thursday’s low…still above Friday’s low…trading below its 20, 30, 50 and 200 DMA. The Nasdaq fell below Monday’s and Friday’s low forming a large black candle…fell below its 78.6% Fibonacci level…trading below its 20, 30, 50, and 200 DMA. The RUT fell and closed below its August 26 low which is the support low of the recent M Top Reversal pattern that we alerted readers to last Thursday…formed a large black candle...fell below its 30, 50 and 200 DMA…trading below its 20, 30, 50 and 200 DMA…still above Friday’s hammer low...this appears to be a key reversal point.

Tuesday’s Action Moving Up: CELG Moving Down: FSLR, BIDU, CF, X, POT, MA, CLF, GS, BUCY, LEH, DRYS, SOHU, MOS, ANR, MEE, AGU, PCLN, AAPL, LDK, STRA, IPI, FWLT, MON, CNX, SCHN, NUE, BTU, AEM, RIMM, DECK, GDX, MTL, MER, V, JASO, MS, NDAQ, IBM, ESRX, AMZN, KMT, FMCN, WRC, SINA, LAMR, NIHD, AMLN, SNDK, COH, INFY, EBAY, EXPE, BRCM Intermediate Term Market Trend: Neutral Short Term Market Trend: Down

Markets Rally, Oil, Gold Hold Steady

DJIA + 289.78, +2.58% SP500 + 25.48, +2.05% NASDAQ Comp. + 13.88, +0.62% Russell 2000 + 14.01, +1.95% Exchange NYSE NASD Advancing 1,793 1,728 Declining 998 1,126 Oil $106.34 +$0.11 Gold $802.20 -$0.30 $SOX 330.84 -0.45 Strongest Sectors: XLY +4.52%...XLF +4.32%...XLU +2.51% Weakest Sectors: XLE -0.69%...XLB -0.19%...XLK +1.21% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK Stocks opened higher sold off immediately until about 2 pm ET and then rallied. The Dow and SPX. The Russell and Nasdaq closed near the middle of their trading range on Monday. The Naasdaq was the weakest of the broad indices with a 0.62% gain. The lack of participation by semiconductors and other technology stocks to the upside was the primary factor in the relative weakness of the Nasdaq today. Rumors allegedly caused by a misposting of a 6 year old Chicago Tribune article relating to United Airlines, drove the airline stocks significantly lower intra-day. UAUA was halted until the company responded. When the error was uncovered airline stocks rallied but still closed down for the day. Pay attention to key support and resistance levels. Trend are lasting only two to three days in the neutral market over the past few weeks. Index Commentary The DJIA rose above its 50, 30 and 20 DMA and above its 38.2% Fibonacci level on Monday...formed a morning star like pattern...and closed near R2 of Thursday's large black candle. The SPX closed at its 50 DMA and near its 38.2 Fibonacci level...is still below its 30 and 20 DMA...closed below its R2 level of Thursday's large black candle. The Nasdaq was the weakest broad index today... closed below the R1 level of Thursday's large black candle...well below its 50 DMA...just above its 61.8% Fibonacci retracement. The RUT continues to be the strongest of the broad indices...closed above its 30 DMA and just below it 23.6% Fibonacci retracement level...closed above its 200 DMA for the 21st day in a row. Stock Commentary Financial and retail stocks are among the strongest trending at this time. Financial stocks worth evaluating: XLF, BAC, JPM, C, WFC, MS, MER, NDAQ Retail stocks worth evaluating: XRT, ARO, SVU, FL, ROST, JCP, KSS, TGT, URBN Stocks for the down trend: X, SCHN, NUE, STLD, BTU, CNX, MEE, AEM, GDX Monday’s Action Moving Up: STRA, GS, IBM, COH, AMZN, MS, BIDU, LAMR, ESRX, NDAQ, DECK, MER, SINA, PNRA, KMT Moving Down: POT, ANR, MOS, FNM, CNX, X, MEE, AGU, FRE, AEM, BTU, FWLT, RIMM, AAPL, MA, NUE, GDX, MON, IPI, FMCN, LDK, HANS, PCLN, UAUA, SNDK, AMLN, ONXX, SCHN Intermediate Term Market Trend: Neutral Short Term Market Trend: Up

Markets Up Big in Early Trading

10:52 am ET: DJIA +229...SPX +21...Nasdaq +17...RUT +11...SOX -0.78...Oil +$0.76 Each of the broad indices are higher this morning. The Nasdaq is the weakest and the reason why is clear when looking at the weakness of SOX in early trading. There is no strength in the semiconductors in early Monday trading. If this doesn't change, the question becomes how long can the Nasdaq rally without the support of the semis? Futures have faded from their pre-market highs but are still up significantly from Friday's close. Stay focused on price action as it relates to the key short term resistance R1/R2levels from Thursday's large black candle. Markets have been open for more than an hour and all nine sectors including energy are trading higher. Early Monday Sector Leaders Financial - XLF +3.96% Consumer Discretionary - XLY +3.50% Industrial - XLI +2.75 Early Monday Market Action Moving Up: BIDU, GS, STRA, IBM, AMZN, MS, PCLN, LAMR, NRA, LAMR, COH, ESRX, KMT, NDAQ, CELG, MA, SINA, SCHN, V Moving Down: CF, FSLR, FNM, FRE, POT, CNX, MEE, ANR, X, MOS, BTU, FWLT, AGU, CLF, BUCY, SOHU, MON, RIMM, SNDK, HANS, LCC, AMLN

Futures Markets Up

Stock futures are trading two to three percent higher than Friday's close. Apparently the rescue plan for FNM and FRE is being well received by futures traders. If cash markets react as well as the futures markets have, look for short-term resistance levels to be broken and the potential for the trend to shift back up. Monday should be a very interesting day. We're back from a two day workshop in the Mid-west were Dave taught stock and options trading to 100+ students, so we'll be posting through out the day.

Indices Find Support, Financials Rally in After-Market

DJIA + 32.73, +0.29% SP500 + 5.48, +0.44% NASDAQ Comp. - 3.16, -0.14% Russell 2000 + 0.23, +0.03% Exchange NYSE NASD Advancing 1,580 1,291 Declining 1,501 1,527 Oil $106.23 -$1.66 Gold $803.50 +$0.30 $SOX 331.29 +7.21 Strongest Sectors: XLF +3.62%...XLP +0.93%...XLY +0.20% Weakest Sectors: XLU -2.10%...XLV -0.53%...XLE -0.41% Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK

As we wrote this week, the four week trend turned down but the longer intermediate term trend could still be viewed as sideway. As support breaks do they fall until the next support level and that happened on Friday.

Remember, when support breaks it is most probable that price will fall to the next support level. At that lower support price can either bounce or break. Due to the 8-week sideways trend, watch to see if this support bounce follows through on Monday and moves above the R1 and R2 levels and watch to see if price action also breaks above its moving averages. After the markets closed information was circulated about the Fed taking over Fannie Mae, FNM, and Freddie Mac, FRE. This had a significant impact on after-hours trading especially in the financial sector. XLF which had gained 3.62% on Friday, gained an additional 2.71% in after-hours trading on Friday after the news on FNM and FRE. Many individual financial stocks also had strong gains after Friday's close. You may have noticed that the financial sector has been relatively stronger than the broad indices over the past week and that it did maintain its sideways trend this week. Is it possible that big money analyzed that financial stocks would be getting stronger and therefore continued buying this sector during the week while selling off the broader market?

Is it really accurate that market action discounts everything?

Could it be that the finacial sectors relative strength indicates that big money had a different viewpoint of financial stocks than they did of the broad markets?

These are important questions that you should draw your own conclusion about and then perhaps alter portions of your decision making process so you will be in a more powerful position to interpret price action in different sectors.

Index Commentary The DJIA formed a hammer on Friday. The lower shadow of this hammer occurred at the 78.8% Fibonacci retracement level from the July 15 low. Watch the R1, R2/R3 levels on Thursday's candles.

The SPX formed a hammer like candle with a larger white body than the DJIA hammer...the lower shadow occurred just below it 78.8% retracement level...the SPX 50 DMA is at the R2 level of Thursday's large black candle. The Nasdaq also formed a hammer like candle with the lower shadow just beyond its 78.8 Fibonacci retracement. The RUT formed a hammer pattern the broke below its 200 DMA and that closed just above its 200 DMA...support came in just below its 50 DMA at its 50% Fibonacci retracement from its July 15 low...this it the 20th day in a row that the RUT closed above its 200 DMA...the RUT continues to be the strongest of the four broad indices. Stock Commentary POT rose on Friday on news of the company continuing to buy back shares. POT formed the equivalent of a bullish engulfing pattern and is still in an intermediate term down trend and trading below its 200 DMA. This is a counter trend support bounce. MOS rose on Friday on news of Morgan Stanley starting coverage of the stock with an overweight rating and a $155 price target. Friday’s Action Moving Up: POT, MOS, CF, BUCY, MA, AGU, MON, SNDK, MEE, GS, IPI, BTU, ANR, SOHU, V, CLF, LEH, AEM, NUE, FMCN, PNRA, MTL, AMZN, MS, WRC, PCLN, X, CNX, SCHN, FNM, JASO Moving Down: STRA, CELG, DRYS, FSLR, AAPL, LDK, ESRX, IBM Intermediate Term Market Trend: Down Short Term Market Trend: Down

Markets Break Support

DJIA - 344.65, -2.99% SP500 - 38.15, -2.99% NASDAQ Comp. - 74.69, -3.20% Russell 2000 - 23.29, -3.14% Exchange NYSE NASD Advancing 522 576 Declining 2,568 2,281 Oil $107.89 -$1.46 Gold $803.20 -$5.00 $SOX 324.08 -11.46 Strongest Sectors: XLP -0.64%...XLU -1.26%...XLV -2.20% Weakest Sectors: XLF -4.90%...XLK -3.58%...XLB -3.55% On Tuesday we wrote, “Should the other indices break their horizontal support levels, for the DJIA 11,300, the SPX 1,260 and the Nasdaq its 50 DMA at 2,334, it will shift our trend status to down.” Today these indices fell below their respective support levels and it is clear from looking at the charts that these three indices are down from four weeks ago. Accordingly as we stated on Tuesday we have changed our intermediate term trend status is down. It is also true that looking at the past 10 weeks on the chart one could come to the conclusion that the trend is sideways. We have changed our trend status to down due to direction of the past four weeks and the breaking of both horizontal and diagonal support. We also want to point out that this potential support break was visible on Tuesday and alerted readers that we would change our status if this condition was met. We hope you were watching for this break and were able to take advantage of the opportunity it presented. Each index formed a large black candle today, so keep in mind that the mid-section of Thursday's candle or the R1 level is now the short-term resistance that any rally must break through before the trend can reverse to up. Take notice that several sectors have also changed trend.

The Russell is the only broad index that is not currently in a down trend and a break below 715 will change our trend status as that price level will be a lower low.

Sector Watch Up Trending: XLP, XLY Sideways: XLF, XLI, XLV Down Trending: XLE, XLU, XLB, XLK

Index Commentary The DJIA failed to confirm Wednesday’s hammer, broke support at 11,300, fell below its 30 and 50 DMA and is now trading below its 20, 30, 50 and 200 DMA. The SPX failed to confirm Wednesday’s hammer, broke support at 1,260, fell below its 50 DMA and is now trading below its 20, 30, 50 and 200 DMA. The Nasdaq fell below its 50 DMA support at 2,334 and is trading below its 20, 30, 50 and 200 DMA. The RUT fell below its 20 and 30 DMA and found support at its 200 DMA and its recent 716 horizontal support. The RUT is at its 200 DMA and still above its 50 DMA. This is a potential M top pattern. Thursday’s Action Moving Up: STRA Moving Down: BIDU, CF, FSLR, MA, ANR, CLF, AAPL, DECK, IBM, PNRA, AMZN, MTL, GS, X, MOS, POT, SCHN, MEE, MON, SOHU, DRYS, BUCY, V, MER, IPI, AGU, FWLT, CELG, ESRX, KMT, NIHD, MS, NDAQ, WRC, HANS, FMCN, INFY, LCC, AMLN, SNDK, UAUA, BTU, SINA, NUE, GDX, AEM, GRMN, FNM, LEH, JASO Intermediate Term Market Trend: Down Short Term Market Trend: Down

Dow Rut Up, Nasdaq, SPX, SOX Lower

DJIA + 15.96, +0.14% SP500 - 2.60, -0.20% NASDAQ Comp. - 15.51, -0.66% Russell 2000 + 3.40, +0.46% Exchange NYSE NASD Advancing 1,610 1,486 Declining 1,483 1,312 Oil $109.35 -$0.36 Gold $808.20 -$2.30 $SOX 335.54 -14.83 Strongest Sectors: XLF +1.57%...XLV +0.58%...XLY +0.51% Weakest Sectors: XLU -1.59%...XLK -1.33%...XLP -0.74% Oil fell and recovered again on Wednesday closing down slightly. Tech, oil and commodity related stocks fell lower. The semiconductor index was down over 4%. The SOX weakness suggests more downside for the Nasdaq and could be the beginning of a trend change for the broader index. Advancers led decliners on both the NYSE and Nasdaq on Wednesday. Retail, financials and health related issues are strongest at this time along with airline stocks: AMR, CAL, DAL, LCC, UAUA. Continue to watch key support areas on Thursday. Sector Watch Up Trending: XLI, XLK, XLP, XLV, XLY Sideways: XLB, XLF Down Trending: XLE, XLU Index Commentary The DJIA formed a hammer near support in its sideways trend. The SPX also formed a hammer near support in its sideways trend. The Nasdaq closed right at its 50 DMA and closing below its horizontal breakout area around 2,350. The RUT held at its short-term support level at its 20 DMA and closed above its 200 DMA for the eighteenth straight day. The RUT continues to be the strongest of the four broad indices. Wednesday’s Action Moving Up: ESRX, GS, CELG, PNRA, MS, AAPL, AMLN, LEH, MER Moving Down: BIDU, FSLR, BUCY, MA, POT, ANR, MOS, CNX, MEE, DRYS, CF, CLF, V, SOHU, JASO, AGU, IPI, PCLN, RIMM, LDK, STRA, FMCN, MTL, DECK,BRCM, NIHD, ONXX, WRC, AMZN, BTU, SCHN, FWLT, GDX, MON, SINA, X, GRMN Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Oil and Gold Lower in Pre-Market Trading

In early Wednesday morning electronic trading oil and gold are lower. Oil -1.95 at $107.76 Gold -8.60 at $801.90 Stock futures are lower in pre-market trading. Watch price action at key support levels for a bounce or a break of support and trade accordingly. See Tuesday's post for key support levels on the DJIA, SPX and Nasdaq.

Rally Fades, Indices Hold Above Support

DJIA - 26.63, -0.23% SP500 - 5.25, -0.41% NASDAQ Comp. - 18.28, -0.77% Russell 2000 - 0.99, -0.13% Exchange NYSE NASD Advancing 1,656 1,421 Declining 1,317 1,455 Oil $109.71 -$5.25 Gold $810.50 -$24.70 $SOX 352.82 -2.45 Strongest Sectors: XLY +1.97%...XLF +1.40%...XLP +1.10% Weakest Sectors: XLE -5.49%...XLB -2.52%...XLU -1.22% Oil was the key driver again on Tuesday. We posted this morning, “if oil continues lower, expect stock prices to continue to trend higher.” Oil which opened lower from electronic trading Monday and over night found a low near $105.46 had begun to rally by the open and then moved higher during the day to close at $109.71. As oil slowly climbed throughout the day the broad indices fell. Since futures started up this morning and the market finished down, this again proves the point that you cannot rely on early morning futures prices to show you the direction of trading for the day. It’s important to understand the driver…in today’s case oil. Notice that advancers led decliners on the NYSE and were essentially even on the Nasdaq. We view three of the four broad indices as moving sideways at this time and we have changed our intermediate and short-term trend status to neutral. Technically the RUT is in an intermediate term up and short-term neutral trend as of today’s close. It is unlikely for this one index to carry this market higher by itself. Should the other indices break their horizontal support levels, for the DJIA 11,300, the SPX 1,260 and the Nasdaq its 50 DMA at 2,334, it will shift our trend status to down. Watch closely these key support levels. Until the market breaks support, trade with a neutral status in mind. If oil continues its downtrend to its chart target of $98.50 don’t be surprised if stocks bounce off support. In either case trade the charts. From a neutral trend the market can pivot up or pivot down so it is important to pay close attention to the nearby support and resistance level. Be prepared for a move in either direction. Stocks that are moving sideways can be very challenging to trade, so look for those stocks that are already trending down or up. Commodity related stocks, oil, gold, coal, steels and Ag-related continued their down trends. I happened to watch a few minutes of a Saturday morning cable business show and one of the analysts was still high on fertilizer stocks and specifically mentioned CF as his favorite. I though to myself, “doesn’t this guy look at charts?” CF took a huge hit dropping over $14 or 9.44%. Again shows that one should rely on their own research and not the opinions of the talking heads. Airline stocks which closed below their highs of the day still finished with gains between 3% and 12% on Tuesday: AMR, CAL, DAL, LCC, UAUA. Sector Watch Up Trending: XLI, XLK, XLP, XLV, XLY Sideways: XLB, XLF Down Trending: XLE, XLU Index Commentary The DJIA closed at its 30 DMA and formed a large outside day. The SPX also closed at its 30 DMA and formed a large outside day. The Nasdaq bounced down at its 200 DMA and closed below its 20 and 30 DMA while forming a large outside day, that was outside of eight of the last nine trading days. The RUT formed an outside day that closed above its 20, 30, 50 and 200 DMA again. If other indices break support expect this index to follow. Tuesday’s Action Moving Up: PCLN, STRA, DECK, UAUA, WRC, AMZN, NIHD, LAMR, NDAQ, FRE, FNM, GS Moving Down: FSLR, CF, X, POT, MOS, BTU, CLF, BUCY, MEE, ANR, CNX, BIDU, DRYS, MON, AEM, AGU, SCHN, IPI, FWLT, NUE, MA, GDX, AAPL, IBM, RIMM, LDK, MTL, ONXX, CELG, FMCN, HANS, PNRA, SOHU, JASO, V, EBAY, MER Intermediate Term Market Trend: Neutral Short Term Market Trend: Neutral

Oil Rebounds From Lows...Still Down...Stocks Pull Back...Still Up

10:54 ET DJIA +159...SPX +10...Nasdaq +20... RUT +3...SOX +4...Oil -$6.12 The broad indices have pulled back from their early morning highs as oil has rallied from its early morning lows. The small-cap RUT has had the largest pullback from early morning highs. All sectors except XLE -3.88% and XLB -1.31% are higher this morning. XLY, consumer discretionary, +2.92% is leading the way and XLF is up 1.03%. The five major airlines are up 9% to 13% this morning. Commodity related stocks; oil, coal, gold, steels and Ag are lower this morning with oil being down. Tuesday's Early Action Moving Up: PCLN, STRA, BIDU, AMZN, AAPL, DECK, RIMM, GS, ESRX, UAUA, IBM, NIHD, INFY, MS, WRC, CELG, LCC, LAMR, FMCN, KMT, NDAQ, PNRA, SINA Moving Down: FSLR, CF, BUCY, POT, X, ANR, MEE, MOS, CLF, DRYS, BTU, CNX, MON, SCHN, AGU, AEM, IPI, FWLT, GDX, LDK, MTL

Oil $98.50 Here We Come?...Look for Stocks to Move Higher

Futures are higher in pre-market trading: Dow +132...S&P +13...Nasdaq +27...Russell +9 As we have written over and over again...oil is the primary driver in the market and if oil continues lower, expect stock prices to continue to trend higher. Oil traded under $111 in electronic trading Monday. However overnight oil has continued to drop and is now trading near 107.90. Anyone who follows our teaching, knows Dave empahsizes trend like no one else and that one of the key responsibilities of traders is to determine the difference between price flucuation and trend change. One point that our posting have consistently stated since early August is that the trend in oil has been down. We have empahsized over and over again the differnce between macro-factors that drive trend and short-term factors that influence daily price fluctuation. Yesterday and this morning we are seeing trend exert itself in price in a very significant way. This is good news for both the economy and stock prices. On Tuesday August 5 we posted the following: "Oil fell further down $2.24 and gold dropped $21.80. The new chart target for oil is $98.50." (Bold is as posted in the original post.) We further wrote on Friday, August 8: "The technical evidence indicates a chart target of 98.50 for oil and we believe that a continuation of the down trend in oil prices is the more likely outcome. Short-term factors like weather or Middle East tensions could cause oil prices to fluctuate to the upside, but would seem unlikely to reverse the intermediate term down trend." The charts do show us the most probable outcome. We just have to be willing to look and then act on the opportunities they give us. Dave's Insight: The Trend is the Most Important Factor in Every Trade.