March 24, 2008

JPMorgan Chase (JPM) is showing itself to be a more effective manager of the economy then the Federal Reserve. In fact Bernanke and Co. may want to watch closely at how well JPM is doing at single-handedly restoring confidence in the market. All kidding aside, the market had another solid day of gains as JPM announced that it would buy BSC for $10/share, and is now showing for the first time some repairing being done to the downtrodden indices. However, and we know we sound like a broken record in saying so, but we are not out of the woods quite yet, so hold on to your pants, because we could still see the bears jump in, in the wake of all the optimism, and pull the rug out from underneath investors once again.

The best strategy at this point, would be to test the water, by slowly committing funds to the long side, and if the market continues to progress upwards, then look at adding more positions and capital. The market gave us the follow through that we were looking for, now it will need to show that any attempt at selling off, will be met with a strong bullish response.

Let’s review the charts…

NASDAQ broke through some key levels of resistance today in the form of the 50-day moving average and the descending level of resistance. At this point, a bit of profit taking may be in the offering, or we may see another sell-off as bears will eventually try to stop this rally from progressing much further.


S&P also had a strong day, but did so on extremely light volume, which causes us to question the conviction that buyers have in this current rally mode that we are in. A strong sell-off on increasing volume could be very discouraging for the bull’s argument that the worst is behind us.