S&P 500 1,098.35 +3.15%
Click here for the Weekly Wrap by Briefing.com.
Bottom Line: Last week's market action was very positive, considering the violence in Iraq, rising oil prices, continuing terrorism fears and mixed economic reports. The advance/decline line was very constructive and most sectors turned in very good performances for the week. The Dow's 2.9% gain was its best weekly performance in 16 months. The big picture in Iraq continues to improve, notwithstanding the recent violence. Trading action Friday seemed to indicate that oil prices put in at the very least a short-term top. Each day and each event that passes without a serious terror act gives the market more confidence in our abilities to preemptively thwart acts of terrorism. This should also result in an erosion of the terror premium in oil over the next few months. Several economic and retail earnings reports last week disproved the bearish assumption that the U.S. consumer was retrenching in any significant way. Finally, it was positive to see the AAII % Bulls drop on the week in the face of such a strong rally. The key takeaway for the week is that market psychology seems to have shifted for the better. However, the lack of substantial volume and severely oversold technical condition of most stocks makes it harder to predict an end to the recent weakness. It is likely that one last correction will occur in September before the significant rally I envision begins in earnest during the fourth quarter. It is very possible that the lows for the year are in place and the weakness in September will not take the major indices to new lows for the year. Longer-term investors should use any extreme weakness in the coming weeks to add to favorite long positions.
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