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Weekly Overview


The positive move in the market over the last few sessions makes clear that despite the terrible economic news and corporate guidance, participants want to put a positive spin on the market due to the success in Iraq. It also seems pretty clear to me that the positive reaction is being met with some level of profit-taking and diminished expectations as each positive market day unfolds. This diminishing positive reaction may be due to poor economic news or because the market can only discount the same positive news a certain amount of time.

As I write today, the Coalition forces may have eliminated Saddam and his sons, but does that differ from yesterday when troops were sitting in his living room chairs? My guess is that both news items suggested that the war is very close to over and Saddam is out. So today there is much less of a positive reaction in the futures markets because the gains in both days are discounting the same positive news. The diminished returns coupled with yesterday's profit-taking suggest that the market is looking for something else to focus on. Some expect that to be news regarding SARS, the economy, corporate profits or some combination of all the above.

Either way, it is a good time to put the recent action to the intermediate-term technical test to see if anything significant has changed or if the combination of war and a three-year bear market makes it simply "feel" great. From what I can tell, the move hasn't been significant enough to alter the intermediate-term picture.

The S&P 500 (SPX) remains in a clear downtrend no matter how you slice it.

There is some momentum on 14-period stochastic, but getting toward overbought in downtrend.

The MACD and recent action bring back memories of last year.

Is the RSI presenting us with a positive divergence? It bears watching.

Last year, the SPX broke its downtrend and moved above the 200-day... and then tanked.

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Way to go 'cuse.
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