The DJI made its biggest one week gain measured from close to close since March 21, 2003 after a week of erratic trading which saw the VIX reach its highest level ever on Friday. For the S&P 500 it was the best week since February and for the NASDAQ the best since August 8. The performance could have been better were it not for a late sell-off on Friday driven either by traders closing positions before the weekend, mutual fund redemptions or the settling of options contracts.

Friday also saw the TED Spead ease the most for the week as it fell by 11%. But as the following chart  of the TED spread over the last year shows, it has a long way to fall before inter-bank lending will revert to its more normal level. We can think of the TED spread as an index of fear - a measure of the extent to which banks distrust one another and fear they will not be repaid for any loans they make. Until this fear index comes down volatility will continue.


We usually study the NASDAQ chart because that's where we expect growth stocks to come from and despite this weeks gains our equivolume chart shows that the index is still under distribution with only one accumulation day in the last twenty.



Stocks have become so beaten down that there are very few breakout choices at the moment with just eight on our cup-with-handle list  which usually has the most choices. Our head and shoulders bottom list, which probably holds the most promise if the rally continues, has 12 choices. 

By far the most rewarding selections have been from our short sale lists. Over the last 13 weeks we selected 205 breakdowns which gave an average return of 84% to their intra-day low from the breakdown price. Breakdowns continue to perform well with nine this week for an average 1 day retun of 5%.

B'down Date	Symbol	Base	B'down Price	B'down Day Close	B'Down day % Gain
10/15/08	FDRY	HS	16.98	15.54	9.27
10/15/08	FNFG	HS	14.91	13.97	6.73
10/15/08	LAZ	HS	36	35.05	2.71
10/15/08	NCI	SS	17.21	16.26	5.84
10/15/08	DWA	HS	27.2	26.7	1.87
10/15/08	NUVA	HS	45.11	43.25	4.30
10/15/08	THOR	HS	24.9	24.73	0.69
10/14/08	SCHW	HS	23.03	20.97	9.82
10/14/08	PACW	HS	27.84	26.77	4.00
Average one day gain					5.03

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