The stock market is becoming increasingly narrow, and it is extremely important for investors to allocate their assets properly, and prudently. We are currently in the second longest bull rally since the 1920s.

As the market gets more selective in 2008, the stocks will re-test the November and August lows. If the lows are eventually broken, things could get ugly, and the bear market pattern of lower highs and lower lows could prevail.

If rally attempts fail to breakout to new highs, and the 1,363.98-1,370.80 bottoms are violated, the next level of key support lies near 1,330-1,340 mark which is where the 2006 breakout began. A severve market correction could cause the SPX to revisit the prior 2002 lows.

I continue to believe that the financials will bottom in 2008 (if they haven't done so already), and by year end, the group could be among the top performing sectors for the year.

In a UBS banking survey, CEOs from the top banks believe there will be less M&A activity in 2008, but companies like "USB, WB may be sellers". Other potential sellers named were BBT,
HBAN, KEY, NCC, STI, TCB, WM.

For the week:

-Gold closed at $842.70/oz up +$31.29 for the week. Last week it closed at $815.80, and also up from the price of $798.10.

Gold is now at the upper end of its trading range. The mid-to-high 800s looks like a good exit price, while the low-to-mid 700s looks to be a good entry point.

-The Commodities CRB Index closed at 358.51, up from 354.23 last week, and up from 348.60 two weeks ago. The index hit a high of 359.05 on November the 7th.

Commodities are in a long-term bull market. Any pullbacks in the CRB Index below the 320-
327 area look to be attractive entry points. The most attractive commodities are in the agricultural area, particularly grains and foodstuffs such as corn, wheat, soybean and
sugar.

-Crude Oil closed at $96.00 /bbl up from $93.31 last week and up from $91.55 two weeks ago.

I am looking for Crude Oil to correct sharply as the US and Chinese economies slow. A drop to the low-to-mid 70s looks to be a good entry point with the new trading range expanding to a low of 70/bbl, and a high of 120/bbl.

-The U.S. Dollar close at 76.20 down from 77.74 last week and down from 77.45 two weeks ago.

As the US Dollar fell to record lows, this created high demand for other major foreign currencies. Currencies such as the Euro, Canadian Dollar, and British Pound all traded to record highs.

Unless the Federal Reserve does something (raise interest rates) to rescue the dollar, the door will be opened for sustained selling in the future. As we speak, the US Dollar is extremely oversold, and despite this weeks sell-off a technical rally may happen at anytime.

As the Yen Carry trade unwound, sell-offs occurred in the Japanese Yen, and the Swiss-Franc which both look like good alternatives to the US Dollar. Oh, don't forget about the Chinese currency- the Renminbi- This could be the next great currency of the century.

We are altering our sell strategy a bit to prepare for a tough year in 2008. At Dow 14,000, or S&P 1525, we will reduce our allocations by 5-10%

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 14,000, S&P 1525, we will reduce our allocation models by 5-10% to;

55% Equities: (Normally 95%) Aggressive
45% Equities: (Normally 80%) Moderately Aggressive
35% Equities: (Normally 60%) Moderate
15% Equities: (Normally 40%) Moderately Conservative
10% Equities: (Normally 20%) Conservative