The Week in Review:

As I mentioned last week, many of our nation's best banks are screaming buys. On Friday, the beaten down financial sector strengthened while the broad market closed down sharply. At the close of trading on Friday, the DJIA closed down -223 points to 13,042, the S&P 500 closed down -21 at 1453, and the NASDAQ closed down -68 points to 2627.

I must tell you that I was very impressed with the rebound in the financials. Last week, I said that I was willing to bet that Buffett was adding to his bank holdings during this pullback. I am sticking with that opinion.

Despite the current crisis in the credit markets, solutions usually occur when we least expect it. Over the weekend, three of the largest U.S. banks agreed on a final plan that may eventually dissolve the current credit crunch. This agreement by the largest banks will put together a fund that will unfreeze the short-term debt markets. This will provide a major psychological boost for the financials.

Throughout our history, the track record is clear. Solutions to major problems always appear.

I made that up by the way.

Market Rebound Coming

The major market averages are oversold and due for a rebound. After losing nearly 8% since the end of October, investor sentiment is gloomy and this usually means the conditions are ripe for a turnaround.

This week, I am looking for a bullish reversal. This is options expiration week, so buckle your seat belts and get ready for a wild ride. Look for the market to sell-off sharply one day this week, and then rally strongly into the close. This will be our signal that the current correction has come to an end.

The Financial Sector usually leads the markets higher. If Friday, and today, are any indicator, it looks like the financials are building a base for the rest of the market.

Where are the Bargains?

You mean other than the financials?

Energy stocks have been soft despite oil prices closing in on $100/ barrel. The fear in the sector is that $3.00/ gallon +++ oil will throw the economy into recession.

To lesson those fears, oil traders decided to take profits to allow the economy to keep plugging along during the Christmas selling season. If oil prices drop to the mid to high 80's, you will see another leg up for energy stocks since recession fears will subside.

Don't forget about technology. I don't think the party is over just yet.

Economic News

The housing market and higher energy prices caused October retail sales to decline. I think you'll see this trend reverse itself if oil prices continue to decline.

The October ISM service index came in at 55.8 up from 54.8 in September. We are now a service economy since our manufacturing base has been shipped overseas.

Last week;

-Gold closed at $834.60/oz up from $809.30 last week and $768.6 three weeks ago.

-The Commodities CRB Index close at 354.54 after hitting a high of 359.05 on November the 7th.

-Crude Oil closed at $95.30/bbl from $95.93 last week and $86.95 three weeks ago.

-The U.S. Dollar close at 75.39 down from 76.30 last week and 78.16 four weeks ago.

Today;

-Gold closed down $38.30 to close at $796.40.

-The Commodities CRB Index close at 349.51 down -5.03.

-NYMEX Crude Oil (Dec contract) closed at $94.62, down $1.70. The January contract closed at $93.52, down 1.78. The big news here is OPEC may boost production.

-The U.S. Dollar close at 75.51 up .08

If the Dow closes below 12,500, or the S&P closes below 1400, we will raise our allocation to the stock market by another 5%.

This summer we raised our allocation to the stock market by 5% when the Dow dropped below the 13,000-12,800 mark, and the SPX fell below 1400.

In the mean time,

Our current asset allocation is 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

At Dow 12,500,or 1400, we will raise our allocation to the stock market by 5% to;

75% Equities: (Normally 95%) Aggressive
65% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative

At Dow 14,500, S&P 1575, we will reduce our allocation models by 5% to;

65% Equities: (Normally 95%) Aggressive
55% Equities: (Normally 80%) Moderately Aggressive
45% Equities: (Normally 60%) Moderate
25% Equities: (Normally 40%) Moderately Conservative
10% Equities: (Normally 20%) Conservative