For Sunday, February 17, 2008                                   Go to Website
	Current Strategy Positions FibTimer currently has 11 successful timing strategies   Aggressive S&P Position -           BULLISH   Aggressive Nasdaq Position -    BULLISH   Aggressive GOLD Position -       BEARISH   Aggress. SMALLCAP Position -  BULLISH   U.S. Dollar Timer Position -         BEARISH   Aggressive BOND Position -       BEARISH These positions were started over previous weeks. You need a paid subscription for real time signals. Sector Funds, ETF and Stock positions are not included above.

Last week we wrote:

"...Although [last] week was a poor one for the stock indexes, the panic bottom discussed in [the prior] week's analysis continues to hold. The selling was intense [last] week, but a look at the chart (see below) shows support is still intact."

This week:

There were gains for the S&P 500 Index - SPX on the first three days of this week, but then about half of those gains were given back on Thursday. On Friday the SPX battled back from early losses to close with a fractional gain. Friday’s action was bullish looking forward to early next week.

Overall, the week was positive with higher intra-week highs, higher intra-week lows and a higher close. The Nasdaq followed in lock-step (see NDX analysis below).

For the SPX, strong support remains at SPX 1318.

The panic lows reached on January 22-23 will continue to generate volatile trading and it will be difficult to chart a trend. Our strategy has turned bullish but there is very little wiggle room in this position. Should the markets again turn lower we could quickly generate a sell signal.

The bottom reached in late January is of extreme importance to the stock market. Should that bottom be surpassed, it would set up continued losses for, potentially, months to come. It would also signal a potential 5 Wave decline and that would result in considerably lower lows. Right now we have 3 Waves (ABC) in places, defining a typical correction.

The charts have every appearance of a bottom being in place that will hold, but there are still bearish concerns.

One of these is the 200-day moving average that we have discussed in recent articles. The SPX is now far below it and the 50-day moving average has also crossed below it (see red and blue lines in below chart).

There are two concerns with the 200-day moving average. The first is that it will be used as a sell signal for bearish traders should it be reached. Thus it will act as resistance to any rally.

The second is more ominous. Back in year 2000, the 200-day moving average started moving lower for the first time in years. It is not something that typically occurs in a correction and in year 2000 it was forecasting the two-year bear market just ahead though no one realized this at the time.

In 2003 the 200-day moving average turned higher and it has stayed that way for five years. A couple of weeks ago however, it again turned lower.

Does this mean a bear market is confirmed? No, but it is a bearish indicator and needs to be watched. No one indicator is right all the time, but this one usually is not tripped in a normal correction. This time, and this correction, may be the exception or maybe we have much lower lows ahead.

On the bullish side we are in the fourth year of the presidential cycle. The sitting president will do all he can to ensure a strong economy so that his party will have the best chance at staying in power.

The Federal Reserve has been unleashed, and though they remain a bit behind the curve in their attempts to forestall a recession, we can expect them to continue to pump huge amounts of cash into the system and reduce rates aggressively in coming months.

They say, "Never fight the Fed." The Fed is attempting to prop up the economy with all its power. It may end up with some unexpected results such as stronger inflationary pressures, but regardless, they will continue to cut rates and pump cash into the economy.

Our trend indicators have a buy signal in place but this is an aggressive strategy and that is typical after such an extreme market bottom has been reached. Note that our long term SPX strategy remains quite bearish. If you are not an aggressive trader you should be in cash.

So, we have bullish indicators with the Fed, the presidential cycle, the short-term advance off a panic bottom in late January.

We also have bearish indicators such as the crossing of the 50-day and 200-day moving average and the declining 200-day moving average for the first time since 2003.

Powerful support remains at SPX 1296.

Short-term support is at SPX 1318.

The SPX portion of this strategy is in a bullish position. Both active and aggressive traders should be in the Rydex Nova S&P Fund (RYNVX) or other bullish S&P index fund.

S&P 500 Index (SPX) Daily Chart

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"...The Nasdaq 100 Index - NDX reached bear market status two weeks ago, when losses reached 20% from the rally highs, and continues to be the weak link with losses taking the index down to critical Fib 78.6% support this week."

This week:

The Nasdaq 100 Index - NDX reached bear market status three weeks ago, but made a bullish reversal at long term Fib support (1729). The reversal has all the requirements of a panic low and such lows typically launch sustained advances.

At the same time, the extreme selling is resulting in an increase in volatility that can easily be seen in the below chart. This volatility increases risk and makes calling a trend more difficult.

Last week we wrote; "Most everything is in place for a rally. The CBOE Market Volatility indexes flashed buy signals three weeks ago. Last week's declines made it to support and were then followed by a late week rebound. The SPX also had a rebound from support. The Fed is taking aggressive steps to prop up the economy. Even the economic stimulus package just passed by Congress to issue cash checks to every taxpayer adds to a potentially bullish picture."

This all remains unchanged and we now have a bullish signal in place for the NDX. As with the SPX signal, it is early and can quickly change if the market reverses. But the current chart patterns, plus the bullish indicators mentioned above, place the odds in favor of higher highs in coming weeks.

The NDX is below its 200-day moving average. Again, this is considered a bear market indicator to many traders and of course the NDX has breached the 20% loss level as well. The 50-day and 200-day moving averages have crossed over.

The NDX portion of this strategy is in a bullish position. Both active and aggressive traders should be in the Rydex OTC Fund (RYOCX) or other bullish OTC or Nasdaq index fund.

Nasdaq 100 Index (NDX) Daily Chart