LET'S LOOK AT THE S&P 500 DAILY CHART

Last week I said the index had to break the March low to set up a low. That is a high probability for fast moves and most markets broke their last significant lows. The S&P 500 did not break the March low due to the Fed dropping the discount rate by .5%. This doesn't solve any credit problems since banks don't go to the discount window. But it sure did change the psychology of the markets. This stock index is still vulnerable to a test of that low and even a marginal break of that low but most other indexes appear to have exhausted into lows. The index should be able to rally 12 trading days from the last low before the index is at risk of a move down or into the early September time window. Volume has not been impressive so a one or two day move down is possible within the next two days but the entire rally should go 12 trading days but we've seen a majority of the price movement. This low was short in time considering the percentage lost and three days short of my forecast. Sorry for that, a move by the Fed was inevitable I didn't see it that early.

LET'S LOOK AT THE 10 YEAR T-NOTE DAILY CHART

The 90 day T-bills had the largest move up in price or drop in yield since the 1987 crash. This is a huge flight to the safest place possible. This is not a chart of the 90 day bills but the 10 year notes and is a good example of what is taking place, you can see the three ascending trendines which are consistence with a fast trend but also consistent with a move up that will exhaust. This move should be complete, at least temporarily within a short period of time. This type of move does indicate a large amount of fear for further credit shocks and until mortgage backed securities can show some large bids a widening credit crunch is possible. This also indicates a huge amount of fear in the markets and that is necessary for a low in stocks but will still leave them subject to a correction because the trend should end with a sharp daily reversal.

NOW LET'S LOOK AT THE FTSE 100

The last Friday I said it looked as though it could have exhausted the move down having broke a low, 60 calendar days from high and being 14% down that matched previous fast moves down. The move up has yet to move into that previous congestion and technically that leaves the index vulnerable to a further fast run down. Until that can occur the index is still vulnerable. I don't see why this index shouldn't struggle up for 12 days since that is the probability for other indexes. But this index could have further downside until it can trade well above the low of July 27th.