*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 165 points and the S&P added 15 points. Volume on the NYSE was just over one-billion shares and remains weak. The A/D line added over 800 units. The new highs expanded a bit and the new lows were about flat. The Russell 2000 gained 8.30 points. The short-term remains negative. The medium-term is modestly bullish. The Value-line gained 15.84 points. The short-term is negative. The medium-term is slightly bullish. The NASDAQ Composite gained 18 points and the NASDAQ 100 gained 25 points. Both closed about in the middle of the days range. I am moving to neutral for both the short and medium-term. This could be very short lived so stay tuned. The DJTA gained 25 points. The short-term is negative but could reverse on a strong day today. The medium-term is positive but close to neutral. The DJUA and UTY closed lower but did reverse early gains tracing out a modest negative reversal pattern. The short-term remains neutral and is in the teeth of important resistance. The medium and long-term remain negative.

We do have a five-wave pattern on the hourly chart from last Thursday to Friday but that has not been confirmed as a completed wave on the daily chart. Any strength today would do the trick but that would leave us with any number of possibilities. As discussed last week it is possible that the S&P completed a double three from January 31 at least weeks low, the pattern so far anyway is corrective. However, that too has not been confirmed and frankly there are a number of viable counts at present that could allow for a good rally but would still be part of the post January decline. For today I feel it best to leave it alone and see what the market has in store. The DJIA held where it needed to in order to allow for the possibility that the decline last week was a fourth wave from January 12. The hourly chart is so far a three so if it is wave 5 from January 12 we should know rather soon. The NDX is in a similar position as the S&P. There are a number of possible wave counts including the possibility that Friday did indeed complete a “b” wave from the January low. As is the case with the S&P what we see over the next day or two could be very helpful in determining the pattern and where we are in the pattern. Support: S&P; 1316-1318, 1300-1303, DJIA; 10,8030-10,840, 10,710-10,722, NDX; 2200-2210, 2150-2160. Resistance: S&P; 1335-1337, 1346-1349, DJIA, 11,000-11,050, 11,100-11,125, NDX; 2330-2336, 2380-2388, 2422-2433.

The market closed higher but was dominated, at least in the big cap averages by the DJIA. Although lagging both the S&P and NYSE Composite did manage to close near the best level of the day. In contrast, the NASDAQ averages closed only about mid range and well below their early session peaks. Volume was once again weak and that again detracts seriously from the positive performance price wise. On the other hand, breadth was quite decent and we also saw a modest expansion in the new highs over what we saw late last week. Thus the internal complexion of the market is mixed.

The CBOE put to call ratio moved down a bit and was slightly negative. The OEX ratio moved down sharply and was very negative. The people at Rydex had to correct the levels of assets in Ursa as they were reported incorrectly for most of last week. They showed some improvement as did the overall ratio. They are not exceptionally bullish yet but are better than what we had last week and could support a rally. The breadth and volume oscillators are neutral. The 3-day oscillator moved up a bit and has moved from bearish to neutral. The McClellan oscillator is neutral but a good day today could move it back above zero. The 10-day and open 10-day Arms eased a bit. They are still oversold and slightly positive. The 5-day Arms is slightly positive while the 21-day Arms is neutral. The daily range oscillators are neutral but weak on the S&P and NDX. They are closer to overbought on the DJIA. The daily trend oscillators are negative on both the S&P and the NDX. They are positive on the DJIA but very close to going negative.

The market put in another of its now famous split performances with the DJIA rallying sharply while the tech heavy NASDAQ averages struggled to stay positive. It is rare indeed to see both of these sectors move up together. The DJIA is now a stones throw from new rally highs while the NASDAQ averages are not even close to last Wednesday’s peak and in fact remain a lot close to the lows. The S&P is doing better than the NASDAQ but not by much. Most of the momentum indicators have corrected and are neutral. In the early stages of strong medium-term advances it is not necessary for these indicators to get to fully oversold levels. However, it is a tough call as to whether the market is in the early stages of a strong medium-term advance. One could make that case from the levels reached by some of the indicators such as the breadth oscillator and the McClellan oscillator back in late December. This could also be supported by the very solid performance from the A/D line but given the mixed and split personality of the market it is hard to quantify. However, on an historic basis they have to be viewed as slightly positive. And the fact that the Arms indexes are back to oversold does add some positive weight to the momentum picture on a very near-term basis. I can say the same in regards to the sentiment backdrop. I am also not getting a lot of help from the wave structure on a very near-term basis as there is any number of possible wave counts. The bottom line is that there is enough mixed signals to warrant a move back to neutral on all of the averages for both the short and medium-term. Long-term I remain bearish. The bonds sold off as stocks rallied closing near the low of the day. I am neutral on both a short and medium-term basis. The XAU was very disappointing as it reversed early gains and closed near the low of the day. It is still above important support and I am still bullish on a medium and long-term basis but I am going to move back to neutral on the short-term until it gets above resistance just above 50.

We are holding a 25% position from 65.62. We covered a 25% position on February 9 for a 9.02 point gain and we covered a 50% position on February 5 for a 5.02 point gain.. They closed yesterday at 57.08 Keep your stop at 59.70 on the remaining 25% position. Make sure to call the early morning hotline at 7:45 AM pacific for any changes.

Stock index futures traders are flat. Stand aside for the morning. Rydex switchers are holding a 20% Ursa and 40% Precious Metals position. Make sure to call the Noon Pacific hotline for any changes.

Due to a previous commitment there will be no letter on Tuesday night February 13 for Wednesday February 14. There will be a hotline on Tuesday but it will be on about an hour later than usual. Thank you.    

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