Decision Week...

The Dow ditched over 7% last week due to concerns over the rescue plan. After the initial rescue plan was rejected, a more effective rescue plan was passed last Friday. Investors, being all scared and skeptical recently, still decided to take some money back home for the weekend instead of risk any more weekend surprises (yes, the US government does seem oddly active during weekends). It is going to be a relatively quiet week ahead with no heavy weight economic data scheduled for release (see economic calendar). This means that this is going to be decision week for investors to really digest all that information from last week and decide what to do.

On the technical front, the 7% drop last week has put the Dow into short term oversold condition again. This means that we should see an accumulation this week. Indeed, the Dow has rebounded slightly every single time it dropped more than 4% in a single week. Does this mean a reversal? Of course not! Even if the Dow rebounds, it is still only a dead cat bounce within the framework of a primary bear trend. It is going to take some real action to call a reversal.