The Week Ahead: The negative payroll numbers are another supporting piece of evidence pointing towards recession. The markets may be discounting up to a 1/2 point cut or more by year end in the Fed funds rate as short term treasuries at the 2 year maturity reached 3.9%. Listen for clues as 4 Fed Bank presidents speak on Monday and Chairman Bernanke speaks in Berlin on Tuesday. The July trade deficit numbers are also released. The week ends with August retail sales, import prices, industrial production, and capacity utilization reports.

Stocks to Watch: Harley Davidson (HOG) continues its 10 month slide as it cut 3rd quarter production targets and sees 07' and 08' results missing street estimates. Office Depot (ODP) continues its long slide as it warned that cuts in small business spending will hurt 3rd quarter results. Apple Computer (AAPL) announced that $100 I-phone rebates will cost company $100 million as a double top appears on the chart. On a positive note, China Technology Development (CTDC) announced a pact with Terra Solar Global to develop solar products.

Special Note: Much of the rally over the past 3 weeks has been driven by the expectation of an interest rate cut by the Federal Reserve to alleviate worsening credit conditions across many sectors of the economy. A sudden rate cut could provide another burst upward in stocks, but a 1/4 or 1/2 point cut on September 18 could be a sell on the news event. Another rally ending signal comes from the candlestick methodology mentioned on August 13 except now two successive black candles on a weekly basis with higher highs has occurred on the DOW, S&P 500, and OEX.


Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.


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