For Sunday, March 16, 2008                                            Go to Website
	Current Strategy Positions FibTimer currently has 11 successful timing strategies   Aggressive S&P Position -           BEARISH   Aggressive Nasdaq Position -    BEARISH   Aggressive GOLD Position -       BULLISH   Aggress. SMALLCAP Position -  BEARISH   U.S. Dollar Timer Position -         BEARISH   Aggressive BOND Position -       BULLISH 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:

"...We have been watching the panic lows of January 22 and January 23 as the base for this correction, or at the least as the start of a substantial and tradable advance. This week has given us evidence that any advance from those lows, if it occurs at all, may be of little duration."

This week:

The S&P 500 Index - SPX, is at about the most critical level that we have seen in many a year.

After what appears to have been a panic low, and potential correction bottom, back on January 23rd, the SPX rallied not in spectacular fashion as would be expected after such a bottom, but for about a week only. It then moved up and down, with increasingly lower highs and increasingly higher lows, until early March.

That created a pennant pattern, or flag pattern as some call them, and such patterns, when they break one way or the other, typically forecast the market's direction for weeks to come, if not months.

The break occurred to the downside and our aggressive positions moved to bear funds. But the selling reached the January lows and reacted with a huge explosive rally. Over 400 Dow points to the upside on better then 9 to 1 upside vs. downside volume.

This is typical of the start of a sustained advance. But after only one day, that huge rally has reversed and the market again sold off right to the same lows as in early march, closing at SPX 1288.14. The sell off was at better than 12 to 1 down volume vs. up volume.

You cannot get any more confusing than this. There are several very good bull market signals in place, and each has been compromised, almost immediately, by sell offs that create a great deal of doubt about their accuracy.

Let's look at the bullish case and then the bearish case. First the bulls.

There is a panic bottom in place back on January 22nd - January 23rd. It fills all the normal requirements of a bottom, with high volume and lots of fear as the CBOE Volatility Index - VIX spiked to over 37. A VIX of around 40 is typical of market bottoms.

The current selling has now stopped at those January lows twice, first on March 10th and again on Friday, March 14th.

By most measures, the selling has created oversold conditions, though not technically a bear market for the SPX. A correction can certainly end here.

The presidential cycle and Federal Reserve actions continue to be bullish indicators. 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 we can expect them to continue to pump huge amounts of cash into the system and reduce rates aggressively in coming months. The Fed bailed out Bear Stearns this week with a rarely used Fed action dating back to depression times. They also pumped 200 billion of potential liquidity into the economy last week in an attempt to ease pressures on the banking system, though apparently it was not enough for Bear Stearns.

Now some of the bearish concerns.

Although the SPX has bounced twice off the January trading lows, most technical analysts use closing prices, not intra-day lows. They consider the close as a more valid measure of each day's trading. Using the close, the SPX has violated the January panic lows and thus is forecasting lower lows ahead.

The levels of fear back on January 23rd, as measure by VIX, were at correct loevels to forecast a panic correction low as having occurred. The levels of fear on March 10th reached only 29, and on Friday March 14th reached 33. Friday's reading was better, but if this is a retest of the January lows, we would expect to see higher reading of VIX. You need fear for a retest to be valid. Lots of fear.

Although the SPX, by some measures, is holding above support at SPX 1270, the Nasdaq Composite Index - COMPQ, Nasdaq 100 Index - NDX and Russell 2000 Small Cap Index - RUT have all reached lows below their respective January lows. They are all forecasting continued declines ahead. They are also all in bear market territory, with losses exceeding 20%.

The SPX is now far below its 200-day moving average and the 50-day moving average has also crossed below it (see red and blue lines in below chart). The average is trending lower too, another bearish indicator. Of course the Nasdaq and Small Cap indexes are also far below these averages.

Conclusion:

The market is at do-or-die levels, and possibly below do-or-die levels. Continued selling early next week could quickly push the SPX into a bear market, along with the other indexes that are already there.

If we hold near current levels, we could "still" see an explosive rally. The possibility is still there. That is why we pulled back from the bearish position for aggressive traders. The risk levels are now far too high. Any market timer who says he know what will happen next week is not going to be sleeping well.

Of course he or she has a 50% chance of being correct, but 50/50 is not a good bet in such a volatile market. At this point, considering all the mixed signals we have, cash is the best bet. We are more than happy to give up the beginning of a sustained advance, or the beginning of a sustained decline, and profit from the rest of it.

Do we have an opinion? Yes. The chances are we will close below support and enter into a bear market that will last through the summer. But if the Fed has the power to stop this and we may see such power unleashed next week and in the weeks to come.

The SPX portion of this strategy is now in a BEARISH position. Active traders should be in CASH (money market funds). Aggressive traders should also now be in CASH (money market funds)

S&P 500 Index (SPX) Daily Chart

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"...Although the Nasdaq 100 Index - NDX has held up better (for this strategy) than the SPX has, it nevertheless is the weaker index in the charts and displaying more bearish signs. As with the SPX, we have the same break below the pennant formation, followed by the quick advance that brought prices back into the pennant. Just a fake out? Nope, on Thursday, as with the SPX, the NDX powered down with a decisive close below the pennant..."

This week:

Although the Nasdaq 100 Index - NDX has violated the January panic lows and technically has entered a bear market with the odds favoring considerably lower lows ahead, it is held captive by the do-or-die levels currently held by the SPX. if the SPX rallies next week, so will the NDX. If the SPX declines, so will the NDX.

The NDX is far below its 200-day moving average and has breached the 20% loss level as well, a bear market indicator. The 50-day and 200-day moving averages have also crossed over.

The NDX also had a pennant formation that was broken to the downside on February 29th. That was a bearish indicator for the coming weeks and months and it was followed by lows that reached below the January panic lows.

Though the NDX has broken support, nothing about technical analysis is in stone. New chapters are constantly written as new outcomes to patterns occur.

If the market rallies and enters a sustained upswing next week, so will the NDX. However, if the market falls apart next week, the NDX is more likely to sufferfaster and larger losses.

The NDX portion of this strategy is in a BEARISH position. Active traders should be in CASH (money market funds). Aggressive traders should now also be in CASH (money market funds).

Nasdaq 100 Index (NDX) Daily Chart