W. B. Busin Intraday Monday, August 27, 2007

1500 EDT


The formation and technicals for the NDX and Dow are showing a difference
with SPX and RUT.


The SPX/RUT are exhibiting weakness while the Dow/NDX are showing
signals that may produce an upward move from this time toward the closing.
The move may include higher highs than Friday's closing high. This is just a
potential for intraday traders and Swing traders.


We expect a similar narrow trading spread for tomorrow's morning session.
The downward bias to tomorrow's action should be more evident than today's.
If price does not begin to decline with more momentum, we may be incorrect
for the direction.


In general, we expect the market to retest near the recent lows as a any fine
correction will do. We are still monitoring the parallel to the 1998 correction
and its time variance. The time variance may be quite large with the aggressive
intervention by Chairman Bernanke and the New York and San Francisco
Fed's.


It may have shortened the entire correction by weeks. In 1998, Greenspan did
not intervene until mid-September and then aggressively after the correction was
over in October.


I have said that I do prefer Chairman Bernanke much more than Greenspan.
What he has done and not done are equally important. If as we expect, the
economy is slogging along at a more moderate pace (not crashing into
recession), then all the better.



If so, the Fed Funds rate should be left where it is. Fed Funds will likely rise in months ahead before it is reduced by the FOMC. To clip the 1992 Clinton campaign slogan, "It's the economy, stupid." seems appropriate at this point in the correction.


It's evident that the financial world did not collapse and we are not plunging into
the next Great Depression are we. (A few "Woe is me!" economists may wish
us the worst, but again, they are wrong.) The correction is not over in our view
but the lows may be set in for some of the indexes. Further declines should
appear in the next few weeks.


A positive conclusion about the correction is that it has been a healthy orderly
decline. The opportunity to find blue chip mutual funds and/or stocks for the
coming rise is a fine gift from the market. We would begin looking for stocks
bottoming early that are in the blue chip category. We continue to believe that
Dow stocks and other blue chip technology stocks will outperform in the next
move upward.



WBB
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