Just when the market looked worse than a dog’s breakfast, things have suddenly changed over the past few weeks that has led to a strong rebound. The market has been shrugging off the bad news and heading higher thanks in part to a stronger dollar and plunging oil prices.

Fannie Mae (FNM, $9.05, down $0.90) and Freddie Mac (FRE, $5.90, up $0.01) both reported losses of $2 billion and $1 billion, respectively. Although their stock prices took a hit the market did a nice job of side-stepping those bombs and ended Friday with its own bang.

The Dow had one of its best days of the year after, advancing 302 points on Friday to finish the week at 11,734. Overall, the Dow gained 408 points, or 3.6%. The S&P 500 was up 36 points, or 2.9% and stands at 1,296. The Nasdaq outperformed both the Dow and S&P 500 with a 4.5% gain and finished the week at 2,414.

The dollar’s rebound can be attributed to the slowing growth in Eurpoe which went on record as saying so. The news led many to believe that there wouldn’t be a hike in interest rates to fight inflation just like the U.S. did when it held steady earlier in the week. The dollar gained over 3% against other major currencies and the rally in the dollar could continue for a while.

The market is building a nice base with higher highs but we will have to see if there’s enough gas in the tank to get the Dow to 12,000. I mentioned that we were setting up for a mini rally and that historically the first couple weeks of August are normally bullish. Bets are still on for a higher market put I would buy some insurance for protection.

Rick Rouse