This is obviously a news driven market and the best we can do in these situations is to identify support and resistance as well as confluence levels and watch how the market reacts at those levels.  I look for candlestick patterns that indicate either a continuation or reversal at those key levels.  I also look for volume to confirm the validity of the move.  Until the market returns to more normalcy, we need to either remain in cash or be hedged in our positions.  As I have said in previous posts, I am looking for a short term bounce as the credit markets begin to loosen and confidence returns.  For the longer term, IMHO the markets will continue to move sideways to down until some of the existing fundamental issues are resolved.

See INDU comments.

The NASDAQ and the RUT (The Russell 2000) have held up better than the DOW and the SPX.  We ended the week with a piercing line candlestick pattern which is a bullish indicator.  My feeling is that the small caps and the technology stocks will be leaders on an impending bear market rally.

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