August 22, 2008; Lehman Bros Buyout Saves Stock Market, Economy, World!!

Lehman Brothers was in fear of going under like Bear Stearns for quite some time and now a bunch of speculation about them being bought out is entering the market and it came in full force last night which has caused this strong open this morning. If this news occurred after a huge drop in the market, I'd be worried a bottom was in place. But it's not. But today is Friday, and liquidity is usually a bit dry, especially on an August Friday, so big moves in the market are very possible. Key levels are already being tested at 11,520. I'd like the Dow to stay under 11,590 because it appears a smaller degree 5 wave drop is incomplete. However this is only for the blue chips. The Nasdaqs have completeled 5 wave declines this week. The Nasdaqs have also been much weaker than the blue chips this whole week which is usually a bearish sign for the overall market.

If this rally holds and picks up steam, or stalls quickly early this morning it will say a lot about how significant this rally is. In no way does Lehman Bros. being bought out save the stock market or economy in any way. So the big picture outlook is still in play. However depending on today's rally, it may put a kink in the armor in calling that wave 3 of (3) is already underway.

The key levels we need to watch for is for the 11,520 area to hold in the Dow because it's the area of a previous wave 4 and the 50% fibonacci retracement of the last decline. More importantly, the next level of resistance after that is crucial at 11,590. That looks like a 1st wave end, so this rally cannot exceed that level and still complete a 5 wave decline. The market has been open 10 minutes and has stalled at 11,522 so it will either break out and probably exceed 11,590, or it will realize saving Lehman Bros. means nothing in the bigger picture and it will reverse and continue it's descent into the abyss.

All we can do is wait, and see what the market wants to do. If 11,590 is broken I'll have to look at the charts, breadth, technicals to see what I should do with my positions.