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Stocks rose sharply Tuesday, and we saw the first signs that a multi-week bottom is either in, or very close, as both of our key trendfinder indicators for the NASDAQ 100 generated a new "buy" signal. These are momentum indicators. We await a "buy" on the weekly Full Stochastics indicator, which would come once the Fast measure rises above the Slow. We also are watching for an early warning of a "buy" signal in the weekly MACD, which would come once the negative histograms start to shrink. The chart on page 10 in tonight's Daily Market Newsletter for subscribers shows the rising trend-channel from July 2006 for the NASDAQ 100 has held, and its Full Stochastics look very close to rolling up. The Weekly Full Stochastics for the Dow Industrials also look very close! to rolling up. There are seasonal positive tendencies kicking in now, markets finding themselves in the "good" six months, from November through May, and the typical month-end and year-end positive bias is approaching. Volume was up on Tuesday's rally, which is also a positive. If a multi-week rally is starting, we expect it to be corrective of the decline from July 2007. What we need to see now is high volume, upside follow-through to convince us that the wave a down of 2 down bottom is in.



The Industrials rallied nicely, up 215.00 points Tuesday, closing at 12,958.44, the exact - to the penny - close we saw last Monday, November 19th. The decline that is finishing from October 11th is just the first of three legs for Intermediate wave 2 down, Minor degree wave "a" down. Once wave 2 b! ottoms, probably in the first half of 2008, a huge rally will follow. That rally will not be economic prosperity-driven, but purely hyperinflationary, as stocks become a defensive strategy against out-of-control devaluation of the dollar. Folks will buy companies as if they were hard assets. Confirmation that an intermediate-term rally has started would come when both Trannies and the Industrials hit new all-time highs. Now that we have a Dow Theory Primary Sell signal, very likely Intermediate wave 2 correction is going to be much deeper than anticipated. Wave 1 rose almost 7000 points from October 9th, 2002, so that allows for quite a deep correction for 2 down. A Fib 38.2 percent retrace would take the DJIA down to 11,525ish.