The market posted its first weekly gains in a month last week after the back broke on Bear Stearns (BSC), plummeting it to $2.84 on Monday after the announced buyout by J.P. Morgan Chase for $2/share on Sunday. The indices were all over the place throughout the week, but the action is still quite bullish heading into the new trading week next week. Many are speculating that this past week's crash and recovery are what was needed to flush out the market and open the door for further upside at this point.

After watching the news on the housing market here in Florida where people are practically giving away homes and after having talked to my realtor, who was kind enough to tell me that my house can now be sold for about 50% less than what I originally listed it at, I am still wondering that, while panic is surely at hand, have enough backs been broken? Nevertheless, I am also favoring further upside into the end of the quarter in the overall market, but we are likely to continue to see higher levels of volatility with it.

Last week ended with a gain of +261.66 points, or +2.2%, in the Dow Jones Industrial Average ($DJI) on Thursday. It closed at 12,361.32 with a gain on the week of +3.5%. The S&P 500 ($SPX) added +31.09 points, or +2.4%, on Thursday. It closed at 1,329.51 with a weekly gain of +3.3%. The Nasdaq Composite ($COMPX) rose +48.15 points, or +2.2%. It closed at 2,258.11 on Thursday for a weekly gain of +2.1%.

The session began on Thursday with hesitation. The market had flipped from an uptrend day on Tuesday to a downtrend day on Wednesday and the trend continued into Tuesday's afternoon lows in the first 15 minutes of the new session. That strong price support level, combined with the 9:45 ET correction period, held very well and the market quickly broke the trend, pushing higher into 10:00 ET. The 5 minute 20 period simple moving average hit as resistance in the Nasdaq, while the 5 minute 200 sma hit in the Dow and S&P. The momentum lost ground throughout the rest of the morning, creeping higher with slightly higher highs until finally breaking the channel with a sharp flush around 11:30 ET.

Even though the market held resistance well into noon, the momentum shift did not hold. Instead, a second move lower into 12:30 ET was at a much more gradual pace and on light volume, creating more of a bullish bias into the afternoon. The indices continued to congest along the 15 minute 20 sma and then the 5 minute 20 sma. The range broke around 13:30 ET, moving sharply higher into the mid-afternoon.

The 5 minute 200 sma served as initial resistance on the afternoon rally. The Nasdaq formed a decent bull flag at that level, but action in the Dow and S&Ps was not as obvious as continuation pattern due to rounded highs. The ranges on these corrections off highs, however, still broke higher around 14:30 ET. This kicked off a second afternoon rally that took it into price resistance from the previous afternoon. A double top formed on the 5 minute time frame into the close with closing prices at the second high, followed by another correction off highs in afterhours trade.

In other markets this past week, a number of declines have taken place. The euro peaked on Monday and is now pulling back sharply, allowing the dollar to finally recover to some extent. Commodities with close ties to the dollar came under pressure. Crude oil and gold both experienced their sharpest downside moves in years. Crude oil hit record highs at $112.75/barrel a week ago Friday. It closed this past week at $101.84/barrel. Meanwhile, gold hit a record high on Monday at $1,034/ounce, but by the end of the shortened trading week it was down 8.3%.

Economic concerns remain strong despite the market's recent recovery action. On Thursday the Labor Department reported that first-time claims for state unemployment benefits hit 378,000 for the week ending at March 15. This was a rise of 22,000 and brought focus to a weakening labor market. In a separate report, the Conference Board reported that the index of leading economic indicators fell 0.3% in February, marking the fifth-straight month it has fallen. The January leading index was also revised lower by 0.3% from a 0.1% decline to a loss of 0.4%. Finally, while the Philadelphia Federal Reserve Board announced that, while sentiment among manufacturing firms improved from negative 24 to negative 17.4, the levels are still very low.







Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.