Falling oil prices yesterday morning drove the DJIA up to an intraday high of 11,867 before it retreated to close at 11,782. Boosted by an intermediate-term uptrend, the DJIA is working to make 11,700, formerly its ceiling of resistance, now a floor of support.

Substantial help was received yesterday from stocks changing to uptrends, which outnumbered downtrends 159:27. This enabled the DJIA to sustain its up slope momentum and rise above and, for the day at least, stay above its ceiling of resistance of 11,700. The robust growth in uptrending stocks drove the IBDI and Trend Ratio both north, confirming that the intermediate-term uptrend is now an emerging buoying factor in the move up by the market indices, as well as the first recent sign that the long-term downtrend may bottom out after Labor Day. The net effect of these two trends is to start providing more than a cushion of support for any near-term downtrend rotation.

As a result the near-term trend indicators are all four moving up from what had been neutral zones. All four indicators have moved up closer to becoming overbought. In other words, the near-term uptrend has just a little room to the upside before a downtrend rotation is expected to set in. Just how high the DJIA can go on this rotation is in substantial measure dependent on the continuing decline in the price of oil and the strengthening U.S. dollar, issues discussed in more detail below. However, even with buoying from the intermediate-term uptrend, it is probable that the DJIA will top out, and then seek a lower base on this uptrend rotation, before exceeding 12,000.

Evidence of the stamina of the current shallow indices' near-term uptrend can be found in the trade-term trend. It has demonstrated progressively higher highs and lows for the past two trading sessions; and even in retreat, as oil prices spiked up yesterday afternoon, the DJIA was able to salvage much of the morning gain. The gains over the last two days did leave the trade-term trend slightly overbought, a condition likely to correct somewhat before the near-term uptrend can move higher over the next two days. To take a look at the 186 stocks changing trends yesterday, please click on http://www.mysmartrend.com

Lower crude prices and a stronger US dollar helped equities add to Friday's gains, sending the S&P to a close above 1300 for the first time since late June. Risk appetite grew, sending the Vix, CBOE "fear factor" index, down 2.7% to just above 20, and the prices of Treasuries lower with the longer-maturities off sharply. The price of the 30-year fell 1 3/32 to yield 4.611%, the 10-year dropped 16/32 to yield 4%, and the 2-year declined 3/32 to yield 2.557%. Crude prices sank to fresh three-month lows, off 75 cents or 0.7% lower to $114.45 despite continued conflicts in Georgia. Commodity prices also fell, with gold prices hitting a new 2008 low. The DJIA added 48 points to Friday's 408-point surge, closing up 0.4%, and the tech-heavy Nasdaq rose 1.1%.

Improved sentiment remained centered upon the downward direction of crude and the upward movement in the US dollar. The dollar advanced to six-month highs against the euro as that currency plunged through major support levels, falling to levels last seen in February. The greenback surged to 21-month highs against the UK pound. UK inflation levels printed up 4.4% in July, its highest since 1997, and over twice the BOE target rate, with a 12.3% rise in food prices the main culprit. Should euro zone GDP and inflation reports due out later in the week suggest similar pressures on prices along with economic weakness, the rally in the dollar may continue. Meanwhile, oil prices sank to fresh three-month lows even as conflict in Georgia continued, accompanied by drops in other commodities on growing pessimism concerning economic growth outside the US and expectations the greenback rally will lower prices in commodities based in the dollar. Among energy sector shares, which dropped 0.04% -the only sector to move lower yesterday- Peabody Energy (NYSE:BTU) shares fell 6.1%, Massey Energy (NYSE:MEE) dropped 5.3% and Consol Energy (NYSE:CNX) fell 4.6%. And this morning the International Energy Agency cut its projections for global oil demand to 790K bpd from estimates of 890K bpd of a month prior. Among material stocks, Freeport McMoRan Copper (NYSE:FCX) dropped 3.8%, US Steel (NYSE:X) fell 6.7%, and Titanium Metals (NYSE:TIE) fell 3.5%.

The weakness in oil prices, viewed as a bonus for consumers, boosted consumer discretionary sector shares 3% Monday, sending the sector up 16.9% over the past three months. Among the best performing stocks, Amazon.com (NASDAQ:AMZN) rose 9.1% upon favorable Citigroup (NYSE:C) analyst comments regarding better-than-expected sales of its electronic book reader, the Kindle. General Motors (NYSE:GM) led DJIA advancing shares, up 7.3%, along with consumer stock Home Depot (NYSE:HD), which gained 4.3%. Also higher, Gap (NYSE:GPS) shares rose 8.9%, Kohl's (NYSE:KSS) 8.8% and Starbucks (NASDAQ:SBUX) 7.9%.

There was also considerable strength in the financial sector, which tacked on gains of 1.7%, on advances in MGIC (NYSE:MGI), up 5.8%, Capital One Financial (NYSE:COF), up 5.7%, and Legg Mason (NYSE:LM), up 5.6%. The gains came despite continued weakness in capital markets. A Fed report underscored ongoing difficulties within credit markets, advising tightened lending standards at many banks in the past month. In a statement likely foreshadow others, JP Morgan (NYSE:JPM) today warned of a substantial deterioration in mortgage markets since the start of July, which resulted in company losses of $1.5 billion excluding hedges. UBS (NYSE:UBS) today reported widening losses and more write downs of $5.1 billion from high-risk credit-related investments. The company also cautioned it expects no improvement in the second half, and will continue to cut jobs. Fannie Mae (NYSE:FNM) shares dropped 7.2% upon analyst warnings the firm may need to raise $5-$10 billion additional capital. And S&P dropped its ratings on certain Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) securities to A-minus from AA-minus. Wachovia (NYSE:WB) revised its second quarter loss to $9.11 billion from $8.86 billion and advised of its plans to eliminate more jobs. The auction rate security buybacks and settlements continued apace as Mr. Cuomo sent a letter to JP Morgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and Wachovia (NYSE:WB) to resolve the matter. Morgan Stanley's (NYSE:MS) $4.5 billion buyback offer was later rejected. To date resolution of the $300 billion auction rate securities market that collapsed last February has resulted in $41 billion of combined buybacks by Citigroup (NYSE:C), UBS (NYSE:UBS) and Merrill (NYSE:MER) have been announced. Deutsche Bank (NYSE:DB) issued a downgrade on Goldman Sachs (NYSE:GS) shares, lowering its target price to $192 from $209, upon expected equity underwriting weakness. And Bernstein published a heavy tome on money center banks, finding them overpriced.

Today's economic data of import centers upon the US June trade balance, expected to post at -$61.5 billion from -$59.8 billion the month prior, came in better-than-expected with a reading of -$56.8 billion. Among company earnings results, Applied Materials (NASDAQ:AMAT), NVIDIA (NASDAQ:NVDA) and TJX (NYSE:TJX) are scheduled to report.

In the corporate corner, Icahn upped his Biogen (NASDAQ:BIIB) stake to 6%... Gilead Sciences (NASDAQ:GILD) won FDA approval to market Viread for treatment of chronic hepatitis B... Applied Materials (NASDAQ:AMAT) is expected to release a key new graphics card... Qwest Communications (NYSE:Q) rose 5.3% on a Citigroup (NYSE:C) purchase recommendation... Verizon Communications (NYSE:VZ) jumped 2% upon reaching a tentative labor contract agreement... Lehman (NYSE:LEH) reiterated its Apple (NASDAQ:AAPL) buy rating on better-than-expected iPhone sales...

By Chip Brian, Editor-in-Chief -- editor@mysmartrend.com

The following equities mentioned above include:

Comtex SmarTrend Alert
                        ----------------------------------------------
Ticker    Last Close    Trend Direction    Trend Price      Trend Date
----------------------------------------------------------------------
AAPL       173.56        Uptrend             173.56         8/11/2008
AMZN       88.09         Uptrend             78.72          7/24/2008
AMAT       18.52         Uptrend             18.79          8/8/2008
BIIB       50.76         Uptrend             66.85          7/21/2008
C          19.82         Downtrend           18.44          7/28/2008
CNX        60.19         Downtrend           95.02          7/16/2008
COF        46.00         Uptrend             41.17          7/17/2008
DB         95.79         Uptrend             88.80          7/18/2008
FCX        82.23         Downtrend           114.81         6/25/2008
FNM        8.40          Downtrend           8.93           8/8/2008
FRE        5.60          Downtrend           6.14           8/7/2008
GILD       56.43         Downtrend           49.53          7/18/2008
GS         176.89        Downtrend           177.44         7/28/2008
GM         10.73         Downtrend           12.56          7/25/2008
GPS        18.72         Uptrend             17.04          7/23/2008
HD         27.51         Uptrend             24.81          7/23/2008
JPM        41.89         Uptrend             39.40          7/17/2008
KSS        51.00         Uptrend             42.90          7/18/2008
LEH        18.44         Downtrend           17.04          7/28/2008
LM         44.78         Uptrend             38.48          7/23/2008
MEE        56.07         Downtrend           64.67          8/5/2008
MER        26.49         Downtrend           28.94          7/25/2008
MTG        7.83          Uptrend             6.33           7/21/2008
MS         45.39         Uptrend             37.97          7/17/2008
NVDA       11.23         Downtrend           21.75          6/12/2008
SBUX       16.30         Uptrend             16.30          8/11/2008
TJX        37.00         Uptrend             32.80          4/28/2008
UBS        21.69         Downtrend           18.87          7/29/2008
VZ         35.25         Downtrend           36.45          6/16/2008
WB         18.21         Uptrend             13.56          7/18/2008
X          128.46        Downtrend           143.17         8/5/2008

INX -- S&P 500: 1,305
Lo: 1,291 Hi: 1,313
Change: +9.00

http://www.mysmartrend.com/images/INX20080812.jpg

INDU -- DOW JONES: 11,782
Lo: 11,676 Hi: 11,867
Change: +48.03

http://www.mysmartrend.com/images/INDU20080812.jpg

QQQQ -- NASDAQ: 2,440
Lo: 2,403 Hi: 2,462
Change: +25.85

http://www.mysmartrend.com/images/QQQQ20080812.jpg

This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.

Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2008

Comtex News Network, Inc. ("Comtex") obtains information from sources deemed to be reliable; however, Comtex does not guarantee the accuracy of any of the information or commentary provided. Comtex makes no warranties, expressed or implied, as to the fitness of the information for any purpose, or to results obtained by individuals using the information. In no event shall Comtex be liable for direct, indirect, or incidental damages resulting from the use of the information. Comtex shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to the information and its use. Comtex does not make specific trading recommendations or provide individualized market advice. The information contained in the Morning Call product is provided as an information service only.

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