Do you recognize those words? I wrote them at the beginning of last Monday’s report. A week later, the same words apply. A week ago, however, it took three and a half days for the primed well to start pumping up stock prices. And, now that traders are confident once again, they have been fast to hit the BUY button.

Let's see how the day unfolds.

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International Economics Review

US Economic Calendar

Econoday Weekly International Report

This is a very good weekly report from Econoday.

Traders can learn a few things from this paragraph:

The Federal Reserve took emergency steps to mitigate the damage to the U.S. economy from the global credit market crisis. The Bank cut its discount rate by 0.5 percent to 5.75 percent, while keeping the main federal funds rate at 5.25 percent. The discount rate is the rate the Federal Reserve charges when lending reserves to banks directly. This is in contrast to the fed funds rate, which is what banks charge other banks when lending spare reserves. The move, which surprised the markets, should improve liquidity and limit the blow to financial institutions from the deterioration in assets exposed to the meltdown in the U.S. subprime mortgage sector.

I accept the view of this writer, but I believe the liquidity crisis occurred mostly because the collateral value of hyper-leveraged hedge funds, which was largely in T-Bills, reached a tipping point when yields rose to 4.80 pct. Margin calls would have been issued when the T-Bill collateral fell, causing these Funds and their bankers to scramble for cash. Furthermore, I don’t feel HB&B wanted to disclose that story to the public out of fear there would be a run on redemptions. So, the story that came out was a nebulous one where banks and Funds were having a difficult time valuing the assets in the syndicated loans they had purchased. Like any con, there has to be an element of truth, and that story may be 100 pct accurate but still avoid the real story behind the liquidity crisis that popped up in a couple short weeks.

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International Equity Markets Review

The indexes across Asia-Pacific equity markets were all down sharply again today.

Asia-Pacific

Here is the latest session data for the Asia-Pacific stock exchanges.

Central banker liquidity injections. Solid green. Major gains.

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Here is the latest chart for the Japanese Nikkei 225 index.

The Nikkei Dow rallied +3.0 pct to 15732 today. The index has a long way to go to recover, but the good news is that there is not that much volume of the past week to eat through.

The Yen strength has really hurt the Japanese exporters, including the auto manufacturers. As I wrote last Thursday, I would be bottom-fishing the top quality auto makers, if, as, and when the Yen weakens, which it has now with the Bank Of Japan liquidity injection, and a return (for now) of the Carry Trade.

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Here is the latest chart for the Singapore index .

Today, Singapore was up a large +6.12 pct to 3322 today.

Indonesia, which sold down -6.44 pct one day and a further -5.94 pct the next last week, rallied today +6.97 pct to 2041.6.

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Here is the latest chart for the Shanghai Composite index .

The Shanghai Composite gained a whopping +5.33 pct today.

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Here is the latest chart for the Hong Kong Heng Seng index .

The Hong Kong market has rallied +5.93 pct to close at 21595.

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Here is the latest chart for the India BSE 30 index .

Today, the Bombay Stock Exchange BSE 30 Sensex index gained +2.02 pct to 14427.

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Here is the latest chart for the Australian All Ordinaries index .

The All Ordinaries index of Australia rallied +4.52 pct today to close at 5926.

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Europe>

Here is the latest session data for the bourses of Europe.

Solid green arrows at 6:43am ET. The rally is more contained than the one that swept across Asia-Pacific markets today, but is strong nevertheless.

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Here is the latest chart for the UK FTSE 100 index.

At 6:44am ET, the FTSE was up +0.74 pct to 6108.

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US Dollar Review

Here is the chart of the recent trading.

The trade-weighted USD has fallen to 81.343, which is a reaction to Fed liquidity injections and lowering the Discount Window by -50 basis points to 5.75 pct.

As I noted last Thursday morning, with the $USD on the rise, “A rally in stocks, however, would probably see another round of Carry Trade activity, and a weakness in the USD.”

The chart shows proof of concept.

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Oil Review

Interactive Chart of Weekly Crude Oil:

Here is the e-miNY Sept-07 Crude Oil chart.

It is presently (about 6:45am) at 71.025.

The movement of Hurricane Dean through to the west, avoiding the US energy infrastructure of the Gulf region, is helping push prices down.

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Gold & Precious Metals Review

Here is the Recent Spot Gold chart.

Spot gold is presently (about 6:51am) at 658.10, and recovering.

As I said late last week, “This is an excellent opportunity to buy. The futures market has not been as weak as the spot (cash) market, which has been depressed as financial institutions are being squeezed for liquidity. So, I perceive they are selling spot and buying forward.”

Soon to rally.

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Here is the Recent Spot Silver chart.

Spot silver is very weak today (6:54am ET), presently at 11.93, recovering nicely and leading the way for a PM rally.

You can remember this quote from last week’s report:

“Take a second look at what will be the last time in this cycle that traders see such low spot silver prices, I believe.

The extreme $USD strength in recent days is throwing much confusion into these precious metals markets.

But, note that gold and silver futures have not caved in. Let the $USD strength play out, and then watch the rally in silver.”

I don’t mince words.

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Wrap-up

I wrote the following words last Thursday Wednesday morning report in the wrap-up:

”Have a good trading day. If you are bullish, the pull-back yesterday and almost certainly today is a huge bonus.

If I am right and there is a rally soon this month, I do believe things will bounce for a month or two, largely on new liquidity from the G-20 central banks and also from short-covering. Besides, if you are cautious and/or negative, any rally is a time of opportunity to sell into strength.

“Buy into weakness; sell into strength” is a successful traders mantra.

That huge weakness was the time to BUY.

I added later (6:16pm ADDENDUM), “Today in the open chat forum, I listed many (41) over-sold stocks that would probably gain an average +10 pct in a subsequent rally, but I cannot make light of the fact there has been much technical damage done in the past month, and overnight in foreign markets.”

That was a terrific opportunity to buy those stocks Thursday afternoon and Friday. There has been a +10 pct gain in less than a week in many of those stocks, and there will be in others.

Trader Wizards can do that. hahaha

Keep your eye on prices and stick to time series analysis of those prices (RSI and MACD). This is a rally, but the Bear market process will unfold now over the next year or two. Rallies in Bear markets are called corrections, for some reason. Whatever you choose to call them, they are shorter in the elapsed time for each cycle than is the case for the average cycle in Bull markets. And, Bear markets are defined by a series of lower highs and lower lows. So this rally has limited legs, as I see it.

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As you can see, I do this report from memory. I try to spend as little time on it as possible. No offense taken, Quentusrex. I'll correct any mistake, and you know that, so why would you think I might take offense?