Last week I wrapped up with the following sentiment - I am still of the mindset that we have found our bottom and that the actions of the fed and the government will begin to ripple through the system over the next couple of months and we will steadily climb out of this hole.

I still believe this to be the case and I will continue to hold my stock position.  The trend of last couple of weeks has been typical of a bottom and we are starting to see a recovery pattern develop.   In the attached chart one year chart, I’ve labeled two previous events, the A line being a recovery pattern and the B line is when the market broke down at the start of the year.

The fundamentals are still looking weak but not catastrophic and it is still too soon to tell if the rate cuts are having an impact.  On Wednesday we get a mix of housing/building data (which always makes me nervous) and inflationary data.  On Thursday, we get the Philadelphia Fed report.  Keep in mind, it was the Philly Fed’s report that caused this thing to get real ugly and drop out of the five year channel.  I’m still amazed that Bernanke was not prepared with a rate cut on the heels of that report.  I don’t think he will make that mistake again.

The Philly Fed was so miserable last time that anything – even slightly negative could spur a nice recovery.  The last red line on the chart, is my expectation for a recovery trend line.  If we drop below 1340 on the S&P, I will get real nervous, real quick.