On Monday we thought that the major indexes were set for a further 2.5% fall before testing support at their previous resistance level, which for the NASDAQ would have been around 1880 following Monday's close. How wrong we were! Since then a reversal in overseas markets, particularly China, and continuing improvement in the Index of Leading Economic Indicators have changed the mood and the indexes have risen each day since concluding on Friday with a surge to new highs of the year on volume that was surprisingly large for a summertime Friday as July sales of existing homes reached the highest level in two years. With these positive signs that the economy is improving, albeit more slowly than anyone would like, we now believe that the rally will continue and investors who still have cash on the sidelines (presumably most of us) will put more into the markets soon, thereby driving prices higher. But, as always, the markets will climb a wall of worry, so some periods of consolidation will be inevitable.

Friday was the 50th Anniversary of Hawaii becoming a State and the boys were out of school so we took the day off. Consequently the newsletter is shorter this week than usual.

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