The market resumed its bullish run on Friday. By close, all three major were up by more than 1%. For the week, the Dow advanced 2.2% while the S&P 500 gained 2.3%. The market has moved higher for four consecutive weeks and the S&P 500 is sitting right on a key technical resistance level of 1010. A better-than-expected July job report was behind today's advance. Payrolls fell by 247K following a 443K loss in June. Economists had been looking for a decline of 325K on average. In addition, the jobless rate unexpectedly dropped to 9.4% from 9.5%. A rise in unemployment rate had been expected. The news immediately sent the equity futures higher and also boosted the dollar. Treasuries, on the other hand, dropped following the report. Since the job losses peaked at 741K in January, the job market condition became stablized in recent months. However, we may still be a few months away before the economy starts to add on jobs.
  
Most major sectors finished the session higher led by financial and transportation. The CRB commodity index declined 0.2%. The US dollar was higher against most major currencies. Treasuries dropped with the yield curve steepened. The three-month US LIBOR was unchanged at 46 bps. The VIX index declined more than 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was neutral compared to the previous session.

The market declined modestly for the second day in a row on this Thursday. Overall trading was quite ahead tomorrow's all-important non-farm payrolls report for July. We had some mixed economic reports today. Initial weekly jobless claims dropped to 550K from 580K in the previous reporting period, which was better than expected. Continuing claims, meanwhile, climbed to 6.31 million and were more than 6.25 million expected. The same-store sales report for most chain retailers were in-line or slightly better than expected.

Most major sectors finished the session lower led by basic materials and healthcare. The CRB commodity index declined 1.4%. The US dollar was higher against most major currencies. Treasuries rose with the yield curve flattened. The three-month US LIBOR dropped 1 bps to 46 bps, a fresh record low. The VIX index rose less than 1 point. The market breath was negative on both NYSE and Nasdaq. The volume was a bit heavier compared to the previous session.

The market stopped making new highs this Wednesday but the decline was quite modest. Opposite to yesterday, most economic news for the session came worse than expected, which gave market participants a perfect excuse to move some chips away from the table. The July ADP employment report indicated job losses of 371K, worse than consensus. The ISM Services Index for July, meanwhile, dropped to 46.4 from 47 in June. A reading of 48 had been expected. The service sector, which accounts for more than two-thirds of the economy, has contracted for 10 months in a row. The only bright news was from the industry front, which showed a small uptick in June factory orders.

I just read an interesting article today written by Simon Maierhofer, who compared the recent rally to the one during the Great Depression. I have attached it below for your reference. Since October 2008, we have also made several comparisons between the current recession and the Great Depression. Specifically, I think one of the most important differences between the current one and the one 80 years ago is the monetary policy set by the Fed. If it were not the trillions of dollars pumped into the world financial system, we could well be living in another Great Depression by now. As a keen student of financial market history, I spent most of the past few months studying the daily market reports during the Great Depression. I think the current rally is more like the one experienced between July 1932 and September 1932, which carried the Dow higher by more than 90%. But we need to remember the rally happened only after the Dow had dropped for 85% from its peak. That rally was fuelled by a similar belief that "the worst is over". After that, despite generally stable economic condition, the market gave up 80% of the rally in a short few weeks and stay there for several months before moving up again. So if history is any guide, one should be extremely careful in chasing stocks when they make new highs, especially we are going to enter the typical volatile season of fall very soon.

Most major sectors finished the session lower led by consumer cyclical and energy. The CRB commodity index rose 0.5%. The US dollar was lower against most major currencies. Treasuries dropped with the yield curve steepened. The three-month US LIBOR was unchanged from the previous session. The VIX index was little changed. The market breath was negative on both NYSE and Nasdaq. The volume was neutral compared to the previous session.

Watch Out - Even This Rally Parallels The Great Depression 

It's been said that history does not always repeat itself, but it does rhyme. It's also been said that those who don't learn from history are doomed to repeat it.
How is this for historic irony, the first leg of the Great Depression reduced the Dow Jones (DJI: ^DJI) by 48%. The subsequent rally lifted the Dow by over 40%.
Fast forward and you will find that the first leg of this recession melted the Dow Jones (NYSEArca: DIA - News), S&P 500 (SNP: ^GSPC), and Nasdaq (Nasdaq: ^IXIC) by just over 50%, while the rally from the March lows - reminiscent of the 1930s rally - also propelled a 40%+ rise in the major benchmarks.
For those hoping that the parallels end there, I'd like to quote Billy Mays, 'But wait, there's more!'
The stock market - bait-and switch at its best
To understand the full severity of what's at stake for investors, consider what author John Kenneth Galbraith observed about counter trend rallies during the Great Depression. While you read this, think about a bait-and switch trap. As the word implies, a trap is less than obvious, otherwise it would fail its purpose as a trap.
'Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune.' We will quote another of his sobering observations in a moment, but first let's see what the parallels were between 1929 - 1932 and 2007 onwards.
Put history on your side
Easy money, used first for real estate and then for stock market speculations, was the pump that fed the great bubbles leading up to the 1920's crash and mid 2000's crash. Real estate prices - as reflected by the Vanguard REIT ETF (NYSEArca: VNQ - News) and iShares DJ US Real Estate ETF (NYSEArca: IYR - News) - topped in 2005, two years before the stock market.
The great real estate boom of the 1920s, topped in 1926 three years before stocks. Even back then, new and exotic product structures allowed investors to leverage their real estate investments in never before seen fashion. Florida was the hot bed back then and is so today. The AP reported that a southwest Florida condominium high-rise has 32 stories, but just 1 tenant. In the 1920s, Florida marshland was subdivided and readied for building when the buyers dried up.
Don't look, but the economy is deteriorating
Every single sector of the real economy is deteriorating, whether it is unemployment, production, corporate profits, real estate, credit defaults, federal deficits, or construction. The discrepancy between fact and fiction is seen by the SPDR Homebuilders ETF (NYSEArca: XHB - News). Builders have nothing to build, yet XHB has rallied over 30% in less than 30 days.
With almost a year of housing inventory yet unclaimed, one wonders who is supposed to be buying homes. Unemployment rates - calculated the way the government used to do it before it was changed in the 1990s - pegs the real unemployment rate around 20%, or 30 million people. During the Great Depression, unemployment reached 25%, the non-farm peak figure of the 1930s clocked in at 35%.
If you think 30 million unemployed is bad, consider the following which puts a face on an otherwise stale statistic. Each of the 30 million unemployed US residents probably supports a family, whether a spouse with children, or just a spouse. Based on 2-4 dependants per unemployed worker, a range of 60 to 120 million Americans are already affected by unemployment; that's 20 - 40% of the US population.
But wait - there is more
Research shows that the decline in industrial production over the last nine months has been as bad, if not worse than the nine month following the 1929 peak. The world stock markets have fallen even faster this time around, compared to 70 years ago. The volume of world trade is drying up at a faster pace than the Great Depression and government surpluses are the lowest in 100+ years.
I know this sounds paradox, especially since broad market indexes such as the S&P 500 (NYSEArca: SPY - News) and leading sector ETFs such as the Technology Select Sector SPDRs (NYSEArca: XLK - News), Financial Select Sector SPDRs (NYSEArca: XLF - News), and Consumer Discretionary Select Sector SPDRs (NYSEArca: XLY - News) have been on a tear for several weeks now.
Must know answers
To profit in such a self-contradicting market, savvy investors absolutely need to know what caused this rally, how long it will go, whether it is doomed to fail, and most importantly what the downside risk is. The first rule is to keep your hard earned money safe; applying this rule will keep you in a position to grow your wealth.
On March 2nd, the ETF Profit Strategy Newsletter alerted its subscribers that a change in trend - from down to up - is about to happen. A similar trend change alert was given previously in December 2008 when the newsletter recommended buying short ETFs above Dow 9,000, with a target for a bottom of Dow 6,700.
This March 2nd Trend Change Alert outlined the following parameters for this rally:
- gains between 30-40%
- the most intense rally since the October 2007 market top
- financials would be the best performer, Ultra Financial ProShares (NYSEArca: UYG - News) in particular 
- the top of this rally would be marked by a 'the worst is over' attitude
You don't need to have a Ph. D. in economics or work on Wall Street to see that this rally has fulfilled all of the outlined parameters and is -according to our analysis - running on borrowed time.
For a few days now, the S&P 500 has been knocking at round number support near 1,000. In fact, for the first time since November 2008, the S&P actually spiked above 1,000, albeit briefly.
Quite often, such strong resistance points repel the initial advance. A consolidation of some sort would allow the indexes to digest the extremely overbought condition, regroup and gather steam for another push towards new recovery highs above S&P 1,000.
The market on adrenalin
Like an athlete on adrenalin, the market is fueled by investor optimism and perception only. Just as adrenaline doesn't last for long, this rally won't either.
Investors who've experienced a few bear markets (1970s and 1980s) know that a new bull market climbs a wall of worry. In other words, new bull markets rise amidst a climate of 'this rally won't last' predictions, not 'the worst is over' attitude. In fact, based on the extreme levels of enthusiasm, it is pretty safe to say that the next leg down will be quite powerful (similar to January - March 2009).
How did gullible investors, who allowed themselves to be swept away by unfounded optimism, fare during the Great Depression? The author mentioned at the outset of this article, John Kenneth Galbraith, described it like this:
'The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited until trading conditions returned to normal, saw the common stocks they purchased drop to a third, and in some cases even a fourth of their purchase price over the next 24 months. The bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.'
Already, this decline has dwarfed the 1973-74, or 1981-82 bear market. Comparing this recession to the recessions of the 70s and 80s, is like comparing Hurricane Katrina to your average summer storm.
Another identifying mark of a depression is deflation. Unlike inflation, deflation suppresses prices of ALL asset classes. Prior to the rally from the March lows, all asset classes were in the red. In addition to stocks and many bonds, even commodities lost money. Broad commodity ETFs such as the PowerShares DB Commodity Fund (NYSEArca: DBA - News), iShares S&P GSCI Commodity ETF (NYSEArca: GSG - News), and even oil lost between 60 and 70%.
The only other time the 'red across the board' phenomenon occurred, was.... you guessed it - during the Great Depression. If you tune out the noise and focus on the facts, it becomes clear that historic parallels are simply too powerful to ignore, the downside risk is huge, the stakes are too high.
The most recent issues of the ETF Profit Strategy Newsletter contains a target level for the end of this rally, the ultimate target bottom (scary!), along with high probability ETF profit strategies and practical advice on how to survive and thrive in the coming years.
Savvy investors do not have to fall victim to a false sense of security. Don't become another casualty of 'those who don't learn from history and are doomed to repeat it.'

The market continued to move higher on this Tuesday although the gains were quite limited. Better-than-expected economic news served as the single most important catalyst to move the market higher today. June pending home sales jumped 3.6% from that in May, which was the fifth consecutive increase. Earlier, personal income and spending data were roughly in-line with expectation and hence had little impact on trading. We should note that despite little movement in the major indexes, sector rotation was noticeable in today's trading. Commodity shares were under pressure while consumer staple and financials took the leadership. It is possible we are close to the point that a short-term pullback is imminent.
  
Most major sectors finished the session higher led by financial and consumer staple. The CRB commodity index rose 0.3%. The US dollar was mixed against most major currencies. Treasuries dropped with the yield curve steepened. The three-month US LIBOR was unchanged from the previous session. The VIX index was little changed. The market breath was neutral on both NYSE and Nasdaq. The volume was neutral compared to the previous session.

The market started the new week with a positive note. By close, all three major indexes were up by more than 1% and hit fresh new highs for the year. The S&P 500 is back above 1000 or more than 50% higher compared to its March lows. The Nasdaq, meanwhile, closed above 2000 for the first time since early October. Generally better-than-expected economic news around the globe is the main reason behind today's rally. The ISM index for July came in at 48.9, better than consensus of 46.5. More important, new orders jumped to 55.3 from 49.2, indicating strong production down the road. The chair of the ISM Manufaturing Business Survey Committee Norbert J. Ore commented that "if the PMI for July(48.9 percent) is annualized, it corresponds to a 2.4 percent increase in real GDP annually." Seperately, construction spending for June made a surprise 0.3% increase. A decline of 0.5% had been expected.

For the week ending on July 31st, most major indexes continued their bullish stances, i.e., their 200-day moving averages were sloping up. As we stated in the previous week, we are now in a bull market after spending 19 months in the bear market. Historically, bull market accounts for 70% of the time. Although valuation is a bit rich compared to a few months ago, it is still very attractive if one takes a long-term point of view. I believe positive fund flow will replace valuation as a main reason to push the market forward. Sectorwise, real estate, commerical banks and airlines were doing great in the past week. Alternative energies, engineering and construction, and sepcial retailers were lagging the broad market.

All 10 major sectors finished the session higher led by basic materials and energy. The CRB commodity index jumped 3.4%. The US dollar was lower against most major currencies. Treasuries dropped with the yield curve steepened. The three-month US LIBOR declined 1 bps to 47 bps, another record low. The VIX index was little changed. The market breath was positive on both NYSE and Nasdaq. The volume was neutral compared to the previous session.