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The swiftness with which the Equity markets moved higher Monday was gratifying to say the least, following our sentiments that the market could indeed turn higher in a remarkably similar fashion to the April 2005 lows with this comment: "The S&P's bottoming attempts of last week are reminiscent of the April lows and if the Nasdaq can rescue the rest of the markets by leading them higher as it so valiantly attempted to do late last week, then there is a sense that an equally difficult and extremely volatile bottoming formation a la the April lows, could in turn forment some equally spectacular upside". That upside as it turned out was unexpectedly driven by the catalytic impact of the appointment of a new Fed Chairman, Ben Bernanke to replace Alan Greenspan at the end of his tenure. The market's response was positive to a well executed and timely announcement of this new appointment. Unfortunately, this brief but still impressive honeymoon rally was cut short overnight and as we have stated on each rally thus far, we are still not out of the woods in this market and although the Nasdaq's performance was strong enough to improve its technical aspect considerably, the S&P 500 remains worriesome, having rallied to the top of the range of what could be interpreted as a bearish type of consolidation, the resolution of which, could still be downward, unless yesterday's momentum carries through so strongly, that we may surmise that the Bernanke Bull Market has already begun and takes on a life of its own as some other magical catalyst, such as tumbling Energy prices or other developments arrive in time to stave off other negatives.

So, once again, we are faced with the dilemma: Can the market defy gravity and breakout still higher, perhaps on the back of this new Fed appointment? The Nasdaq says yes and again as before, should this actually happen, it would have to be a "Go with" situation, just as yesterday's early momentum signalled. The taking out the highs of yesterday would have to be considered as indicative that this rally might have a lot further to go and we have to rememember how the April bottom was so particularly difficult to call and was extremely volatile with dissuasive selloffs thwarting off bullish ideas, just as this one and yet out of that abyss came an extraordinary rally. The same market today is trying so equally hard to bottom, that if it succeeds in what ever form it eventually takes, the ultimate upside in all likelihood, could be equally powerful if not more so, as it might enable most of the Equity indices to break out of their broadening consolidations or upward running corrections that have trapped them in an ascending range all year.

Clearly, a breakout through the upper ranges of these consolidations looks easier for the Nasdaq and Russell 2000 right now, but seeing such moves occur, would free rest of the Equity indices and markets to move higher and that could be inordinately bullish in so doing, but first we have to get there and that is the task at hand for the markets over the coming days and or weeks...

As we stated going into Monday. This is really what we need to be looking for as the week unfolds. We need to keep this theme in our minds as a guidepath as the coming days unfold. Again, if the beariish consolidation gives way to the downside, we will have to re-evaluate, but it could be a bear trap, not unlike what occurred in April, but the important thing to keep in mind is if we see bullish action continue to unfold with strong upward action on heavy volume, as one that could still develop a lot of upward power and momentum. And so far this week we have to be re-reminded of the similarities with 1999, when back in late October going into November, no-one was ringing a bell that heralded in the spectacular tech rally that would lead the rest of the indices in the US and markets around the World in a stunning move higher. Conditions appear to be strengthening for a repeat performance to unfold.

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