The stock market made a dramatic intraday recovery erasing almost all of its lows for the day. What does "Close, but no cigar" mean? Simply, "falling short of a successful outcome and get nothing for your efforts".

In the Weekly Briefing I said that we have yet to see the capitulation phase. Today, we came close.

Capitulation usually occurs with a sharp sell-off at the beginning of the day, followed by a reversal that ends with the market registering big gains at the close. Today, the market erased most of its 343-point drop, but failed to close up sharply on the day.

By the way, we have officially corrected 10% from the highs.

The stock market is short term oversold, and should attempt a feeble rally before re-testing today's lows once again. I hate to be the one to tell you this, but I don't make the rules.

One of the reasons for today's reversal was on rumors that the fed was calling an emergency meeting to cut short term rates. Based on where the bond market has gone lately, cutting rates is no longer a matter of if, but when.

In the midst of the latest credit crunch, the yield on two-year Treasury fell to its lowest in 22 months. The rest of the Treasury market closed as follows;

2-year note is yielding 4.22%
10-year Treasury is yielding 4.66%
30-year bond is yielding 4.96%

Going forward, I am looking for a rally the next few days followed by a re-test of today's lows. By months end most of the selling should be over, and the "real traders" will be back from vacation.

We have raised our allocation to the stock market by another 5% as the Dow dropped below the 13,000- 12,800 mark and the SPX to below 1400. Our asset allocation now stands as follows;

70% Equities: (Normally 95%) Aggressive
60% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative

We will raise our allocations by another 5% if the Dow hits 12,000, and or the S&P goes below 1325.