The market ended the week with losses across the board despite starting off with huge gains. With hurricane Gustav slowing down and not wrecking havoc on the Gulf, we were off to the races on Tuesday. Oil and commodity prices were dropping and at one point the Dow was up nearly 2% to 11,831 but quickly gave back those gains by the end of the day. All three indexes hit key resistance levels and folded like a cheap lawn chair.

The rest of the week was a disaster for the market as a slew of economic reports dashed any hopes of a recovery. For the week, the Dow lost 323 points, or 2.8%, to finish at 11,220. The Nasdaq was hit by a truck as it fell 4.7% and ended at 2,255. The S&P 500 followed suit with a 40 point loss, or 3.2%, and closed at 1,242.

The resistance levels remain 11,800 for the Dow; 2,450 for the Nasdaq; and 1,300 for the S&P 500. Until they are broken and the market can stay above these levels, we will continue to see choppy, volatile action. The support levels are 11,000; 2,175; and 1,200, respectively. If these levels are broken then the market will really be in trouble.

However, as I mentioned last night in the NewsFlash, the market is expected to rally on the Fannie Mae (FNM, $7.04, up $0.62) and Freddie Mac (FRE, $5.10, up $0.15) news and it could be imperative that they hold these gains. The Dow futures were up over 250 points to 11,486, Nasdaq 100 futures were soaring 40 points to over 1,800 while the S&P 500 futures were also up nearly as much to 1,276 this morning. If they hold we could be looking at a big rally when the opening bell rings.

I expect Fannie and Freddie to hold Friday’s after-hour losses but other financial stocks should enjoy a pretty good day along with the rest of the market.

Rick Rouse